Robert T. Sumichrast
Dean and Simon S. Selig, Jr. Chair for Economic Growth

Published: January 4, 2013 | Vol. 5, Issue 6

According to our Economic Outlook forecast, Georgia’s economy will grow in 2013. In fact, it will grow faster than the country as a whole. This is partly because of political decisions. The world’s leaders have avoided the worst possible policy mistakes, U.S. leaders have partially addressed the fiscal cliff, and Georgia’s leaders have made our state more competitive than it was a year ago.

While this is good news, don’t get too excited. Georgia will grow at just over 2 percent, and that’s not a rapid expansion. The risk of a 2013 recession in Georgia remains high, at about 30 percent.

There are two main reasons for Georgia’s improvement relative to the country. First, the massive restructuring of the state’s private sector is now complete. Our real estate bubble is in the past.

The second reason is the opening of several large relocation and expansion projects, which will provide a tailwind to Georgia’s economic growth. Companies like Caterpillar Inc., Baxter International, Starbucks and State Farm will help the state create more than 53,000 jobs in 2013.

Projects such as these are attracted to Georgia, in part, because of cost, logistics, and tax advantages. Legislation passed in 2012 makes Georgia more competitive by improving our tax system and providing a $100 million fund to close deals with companies considering expansion or relocation in Georgia.

Georgia has also made progress restructuring its government. The state’s biggest remaining challenge is the uncertainty regarding federal funding for mandated programs such as Medicaid.

Pension liabilities and retiree health care costs are the next biggest challenges, but those problems are unlikely to lead to major spending cuts or layoffs over the next few years. We do expect more full-time state government positions to be converted to part-time. And, we expect changes in benefit and retirement plans that shift costs and risks from taxpayers to employees.

Similar to state government, local governments will struggle with reductions in federal and state funding, pension liabilities, and retiree health care costs.

On top of those challenges, many local governments are still spending above their means. That’s mostly because local governments are extremely dependent on property tax for revenue.

Of course, this is just the overview. If you would like more information on this, please visit the Selig Center’s website.

Finally, to all of our alumni and friends, I wish you a prosperous and productive New Year. I have a feeling 2013 is going to be a good one.

Robert T. Sumichrast, Dean
Terry College of Business

Follow me on Twitter @Sumichrast

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