Moody's economist tells Nevada Economic Forum that the Iran war and rising costs could flatten state revenue growth

What happened

Economists warned Nevada's Economic Forum last week that state revenue could face a flatter road over the next two years, the Nevada Current reported. Kumael Bilgrami, an associate economist at Moody's Analytics, told the panel that consumer spending and the AI buildout have been "important tailwinds" but are expected to weaken soon.

According to the Nevada Current, the U.S. and Nevada moved "relatively gracefully" through economic policy shocks tied to new restrictions on trade and immigration over the past two years. The coming period may be harder.

Why the outlook is flattening

Energy prices and the Middle East

Bilgrami said Moody's expects growth to stay stable but relatively flat as those supports fade. He pointed to the conflict in the Middle East as a major reason. "A major reason behind this is … the conflict in the Middle East and the resulting surge in energy prices," he said, as quoted by the Nevada Current.

Paychecks and savings

Wage growth is no longer keeping pace with inflation, the Nevada Current reported. That squeezes both Nevadans and the out-of-state visitors the state depends on for tourism. Bilgrami also said personal savings rates have "dropped dramatically" this year.

Sales tax growth driven by prices

Moody's and state economists are projecting sales tax collections to rise in the coming fiscal years. They acknowledged that the growth will come almost entirely from higher prices, not from people buying more goods.

What it means for Las Vegas tourism

Domestic and international visitors

Moody's expects domestic visitation to stay "downbeat," and Bilgrami said the recent decline has been sharper than the drops after the 2008 crisis and 9/11. International tourism shows "early signs" of improving for Nevada, but he said it was too soon to know if it would stabilize. Local businesses have also described pressure from tariffs and the tourism drop.

Bilgrami said the K-shaped economy, where higher-income households are doing fine and lower-income households are struggling, is becoming more pronounced. Las Vegas visitors over the past three years in particular have skewed toward much higher household incomes, the Nevada Current reported.

Moody's baseline assumption

Moody's baseline assumes the Middle East conflict "begins to wind down in upcoming months." Under that scenario, Bilgrami said conditions would improve toward the "back end of next year."

Limits of the AI and data center boom

Bilgrami cautioned against treating heavy AI investment as a long-term fix. He said stock market "wealth effects" will be more limited because of stretched market valuations. Nevada is part of the data center boom, including projects like the one at the center of a Boulder City data center review, but he said there are "a lot of downside risks."

Data centers bring short-term construction jobs but very few permanent ones, he said. Nevada has "below average exposure" to direct job losses from AI, according to Bilgrami. But if AI triggered mass layoffs elsewhere and a recession followed, Nevada's tourism-based economy would feel it acutely.

How the forecast shapes the state budget

The Economic Forum is a five-member appointed panel that approves Nevada's biennial revenue forecast. That forecast is the base for the governor's recommended budget, which goes to the Legislature. Lawmakers must pass a budget, subject to the governor's veto, by the end of the 120-day session. Earlier forecasts suggested the next Nevada budget could grow.

What to watch next

• The Economic Forum is scheduled to meet Nov. 16 to officially approve the revenue forecast.
• The governor's recommended budget will be built on that approved forecast.
• The 2027 Legislative Session begins in February, when lawmakers take up the budget.
• Bilgrami said it is too soon to tell whether early gains in international tourism will stabilize.