Savannah Chamber

19 13 The downturn in commercial real estate markets – especially severe in the metros with highest vacancy rates – constitutes the main threat to the banking industry. A fatal combination of high interest rates and high vacancy rates will continue to bring down commercial real estate prices and the value of commercial mortgage-backed securities. Meanwhile, outflows of inexpensive deposits have reduced banks' ability to hold onto these distressed assets, but we expect those outflows to shrink in 2025. Nonetheless, a few regional and community banks may fail, or be forced to merge with stronger institutions. In 2025, slower growth in demand for many types of loans and higher losses on loans will limit Georgia banks' profits. Households' credit scores are at decent levels, but credit scores will deteriorate as the economy slows. Nonetheless, we expect higher consumer spending will support some growth of non- revolving credit to households. Banks tightened lending standards in both 2023 and 2024, but we do not expect banks to tighten much more in 2025. More auto loans will add to the bottom line. In addition, an increase in mortgage refinancing, albeit from a very depressed level, will help the bottom line. Georgia's leisure and hospitality industry is a high contact industry and therefore was hit extremely hard by the COVID-19 pandemic and initially was slow to recover. In 2022, lodging demand rose substantially and Georgia's hospitality industry fully recovered from the pandemic recession. In 2023-24, visitation rose to record levels, generating record levels of direct and total economic impacts. Georgia ranks fifth among the states in terms of its market share for domestic visitors. In 2025, Georgia's leisure and hospitality industry will continue to expand, but at a slower pace than in 2023-24, reflecting slowdowns of the state, national, and global economies. The prospects are different for various segments of Georgia's hospitality industry. First, leisure travel will continue to outperform business travel. Second, domestic travel will outperform international travel. That observation applies to both leisure and business travel. Third, prospects for the lodging industry vary by property type. Due to the economic slowdown, economy and midscale properties will fare best. Upscale and luxury properties catering to group/convention travelers, inbound international travelers, and fly-to leisure/business travelers will fare worst. Full recovery for such properties took longer than initially expected due to structural changes such as the widespread substitution of videoconferencing for in- person events. Such changes will be an enduring headwind for Georgia's tourism industry. Prospects for Manufacturing Manufacturing is cyclically sensitive and depends heavily on complex supply chains and export markets. We expect production by Georgia's manufacturers to grow faster than production by US manufacturers. The main reason Georgia's manufacturing sector will outperform the nation's manufacturing sector is that Georgia saw many manufacturing economic development projects announced in 2020-24. Those projects – as well as some announced in prior years – will continue to build out and become operational, contributing to the increase in industrial production we expect for Georgia. We expect supply chain problems to diminish, which will support both Georgia and US manufacturing. Due to recent shortages of critical inputs and other supply chain problems there is a need to produce more in some product categories. We expect the number of manufacturing jobs in Georgia to increase in 2025. Georgia's largest manufacturing industry is food processing, which adds value to Georgia large production agricultural economy. Indeed, Business Facilities magazine ranks Georgia eighth as a leading state in food processing. In 2025, we expect the food processing industry to do well. Many of the economic development projects announced over the last few years were food processors. Agribusiness and food processing projects announced in 2020-24 include Walmart's dairy facility in Valdosta, Lee Kum Kee Sauce Group, FreshRealm, Yakult, 4 Fungi's Regenerative, CJ Foodville, PepsiCo Beverages, Jack Link's, AFB International, MANA Nutrition, American Peanut Growers Group, King's Hawaiian, Bimbo QSR, Nestle Purina, Anheuser-Busch, BANG ENERGY, Sugar Bowl Bakery, Kerry Group, Batter Up Foods, Frito Lay, Coffee Cake Bakery and General Mills. In 2025, Georgia's vehicle and vehicle parts manufacturing industries will benefit from higher domestic demand for vehicles. In addition, supply chain problems are expected to diminish, which will enable the industry to increase production to meet consumers' pent-up demand more fully for vehicles. In 2024, the

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