Hawaii’s economy is expected to experience subdued growth over the next few years, largely due to high global import tariffs and uncertainties surrounding federal government policies. According to the latest quarterly economic outlook released by the state’s Department of Business, Economic Development and Tourism (DBEDT) on October 5, 2023, the state anticipates modest improvements in certain areas, but overall growth will remain slow.
The new forecast indicates that inflation will not surge as previously expected. DBEDT now projects that inflation in Hawaii will rise by 3% this year and 2.8% in 2024, compared to earlier estimates of 3.8% and 3.6%. Despite this adjustment, inflation is likely to remain above the ideal rate of 2%, inhibiting stronger economic growth. DBEDT stated, “These conditions are expected to weigh on economic activity, keeping growth subdued through 2026.”
In terms of economic metrics, Hawaii’s economy, when adjusted for inflation, is projected to grow by 1.3% in 2023, followed by 1.4% in 2024, and gradually increasing to 1.8% by 2028. This anticipated growth rate is a slight improvement from the 1.2% growth forecast in May 2023. In real terms, a 1.3% increase in GDP equates to an additional $1.2 billion in economic activity within the state’s approximately $91 billion economy.
Employment and Visitor Spending Trends
DBEDT Director James Tokioka commented on the employment landscape, noting that strong job growth persists in Hawaii. The state’s labor force has increased by 1.3% this year through July, prompting DBEDT to revise its annual job growth outlook to 1.4%, up from 0.9% in the previous forecast. The growth in non-agricultural wage and salary jobs indicates a robust labor market, which has compensated for job losses in federal roles.
Visitor spending is also projected to surpass earlier predictions, with an expected growth of 2.3% in 2023, an increase from the prior estimate of 1.3%. Notably, last year’s visitor spending was revised downward from 0.1% to a decline of 0.7%. This uptick in visitor expenditure is crucial for Hawaii, where tourism plays a vital role in the economy.
Construction Sector Growth
The construction sector continues to contribute to Hawaii’s economic stability. Government contracts for construction surged by 31.2% in the first half of 2023, while private construction permits increased by 33.4%, amounting to $843 million compared to the same timeframe last year. DBEDT highlighted construction, along with steady employment gains and increased visitor spending, as key factors sustaining the state’s overall subdued economic growth.
In summary, Hawaii’s economy appears to be navigating a challenging landscape characterized by high tariffs and policy uncertainties. Despite these obstacles, James Tokioka expressed confidence in Hawaii’s resilience. He stated, “Our people, our industries and the enduring strength of our communities will carry us through this transition.” The forecast suggests that while growth may be muted in the short term, opportunities for recovery and expansion may arise in the years ahead.
