The Washington State Economic and Revenue Forecast Council’s latest economic forecast is very similar to its November forecast, with the same muddle-through conditions expected for the rest of the biennium, along with a high degree of downside risk.
Factors outside the state are the biggest threat to the U.S. and Washington economies, according to the council, which says it is likely that Europe will enter another recession or is already in one. If the sovereign debt crisis leads to a financial crisis, the U.S. economy is likely to enter a new recession as well. The weakness in Europe has contributed to a slowdown in Asia, a concern for Washington exporters. The Washington economy is recovering about as expected in the November forecast. There have been no major developments since November that have altered the outlook significantly, the council says. The state’s economy is narrowly outperforming the U.S. economy and the council expects that trend to continue.
Forecast changes due to economic conditions, including revenue already collected, added $32.2 million, for a total increase of $95.7 million above the November forecast. State general fund revenue for the 2011-13 biennium is now forecasted at $30.284 billion. The initial forecast of general fund revenue for the 2013-15 biennium is $32.294 billion, an increase of 6.6 percent from the revenue of the current biennium.
Forecast of state general fund revenue for 2011-13 (probabilities in parenthesis):
Baseline (50 percent): $30,284 billion; $95.7 million higher than the previous forecast.
Optimistic (10 percent): $32,025 billion; $1,741 million more than the baseline forecast.
Pessimistic (40 percent): $28,749 billion; $1,535 million less than the baseline forecast.
Governor’s Council of Economic Advisors’ assumptions: $30,261 billion; $23 million less than the baseline forecast.