The Fermanian Business and Economic Institute forecast was unveiled Thursday and the predictions were optimistic but cautious.
Point Loma Nazarene University chief economist Lynn Reaser sees an improving economy in San Diego next year, but not a full blown recovery.
Reaser's forecast predicts unemployment will fall gradually, tourism will regain its place in San Diego's economy and military spending in the region will remain strong. The report also predicts the housing market is poised for a rebound.
"We are coming off the low point, as we see foreclosures come down," said Reaser. "Delinquencies come down. People are out again buying homes. And even a few more houses are being constructed."
State Comptroller John Chiang said he's worried about the state's debt, but also hopeful.
"We're heading in the right direction," said Chiang. "So we've made significant progress from where we were just three or four years ago, but things can change at a moment's notice, what's happening in Greece impacting the stock market."
Both Chiang and Reaser warn that their optimistic predictions could be turned upside down if federal lawmakers can't find a way to avoid the so-called fiscal cliff at the end of December.
Both said automatic widespread tax hikes and deep spending cuts could conspire to plunge the nation back into recession.
