Savannah Chamber

15 1 The Georgia Outlook for 2023 By Jeffrey M. Humphreys Terry College of Business, University of Georgia The 2023 baseline forecast for Georgia's economy reflects the high probability – about 75 percent – of a US recession. A 2023 recession is not inevitable, but the probability of a recession is uncomfortably high. The outcome is likely to be determined by Federal Reserve actions to reduce inflation and how households, businesses, and the financial markets response to those actions. Even if a technical recession is avoided, the pace of economic growth will be very slow. We expect the 2023 recession to be mild. At this time, Georgia is very well positioned to weather a mild recession. Georgia's inflation- adjusted GDP and total employment fully recovered from the pandemic-recession in 2021. In 2022, Georgia's total employment expanded further, surpassing it pre-pandemic peak level. It is very good that there are an unusually large number of projects in the state's economic development pipeline, including Hyundai's plan to start construction of a large electric vehicle manufacturing plant in 2023 – the largest economic development project in Georgia's history. Although both the US and Georgia economies are likely to be in recession in 2023, we expect Georgia's economy to outperform the US economy. The 2023 forecast calls for Georgia's inflation-adjusted GDP to increase by 0.2 percent, which is 0.4 percentage points above the 0.2 percent rate decline expected for US GDP. Similarly, Georgia's nonfarm employment will drop by rise by 0.1 percent in 2023, which is better than the 0.5 percent decline estimated for the US. Georgia's unemployment rate for 2023 will average 3.8 percent. Georgia's unemployment rate will remain below the US unemployment rate. Georgia's nominal personal income will grow by 4.0 percent in 2023, which is slightly above our expectation of 3.5 percent inflation for 2023. The recession will be the main factor behind slow personal income growth, but a second factor is the continuing wind down of pandemic-related federal stimulus programs that provide transfer payments to individuals. There are several possible developments that may cause Georgia's economy to perform better than our forecast predicts. For example, consumer spending out of savings accumulated during the pandemic could be stronger than we expect. Supply chain issues may resolve faster than we expect, which would boost sales of new vehicle sales and other manufactured goods that have been in short supply. Foreign immigration to Georgia might be stronger than we expect. Finally, the economic push to Georgia's economy from three straight fiscal years – 2020 through 2022 – of record-levels of economic development projects could prove stronger than we expect. In 2023, the pattern of Georgia outperforming the U.S. will continue. State-specific forces that will help Georgia's economy to outperform the nation's economy include: (1) the build out of many projects in Georgia's economic development pipeline; (2) competitive state-level economic development incentives that help refill Georgia's economic development pipeline; (3) more leverage than most states from higher new vehicle sales; (4) strong performance of the state's transportation and logistics industry, especially Georgia's deepwater ports; (5) solid prospects for Georgia's military bases; and (8) demographic trends are supportive of economic growth. For example, Georgia's population will grow more than twice as fast as the US population due primarily to the in-migration of workers and retirees from other states. Assuming the 2023 recession is mild, several sectors of Georgia's economy will continue to expand – albeit more slowly than in 2021-22. Due to recession, the pattern of job growth across

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