The state Department of Business, Economic Development and Tourism is lowering its economic growth projections for the year, as well as 2023.
According to the department's latest economic report, Hawaiʻi is projected to grow 2.6% in 2022, and 1.7% next year. Both are lower than the projections made in the second quarter — when state economists projected economic growth at 3.2% for this year.
Tourism
The lower projection comes despite the tourism industry's continuing recovery, higher tax collections, and improving labor market conditions.
So far this year, visitor arrivals remain lower than the first seven months of 2019. However, visitors spent $11.2 billion this year — up 5.8% from the same period in 2019. According to DBEDT, between September and November, there will be just as many air seats to the islands as there were during the same time in 2019.
DBEDT is predicting a total of 9.2 million visitors will have traveled to the islands in 2022, with a projected spend of $19.1 billion. Experts predict arrivals will rise to 9.8 million in 2023, and 10.2 million in 2024.
Tax revenue and unemployment
The state's general fund tax revenue has reached $6 billion so far this year. That's a 35.1% increase from the first seven months of 2019. DBEDT reports the general excise tax revenue increased 16.4%, income tax revenue climbed 53.6%, and transient accommodation tax revenue rose 30.2%. The increases in these revenues are partly due to higher inflation rate, and economic growth.
The state's unemployment rate continues to improve in 2022. DBEDT reports the unemployment rate during the first seven months of the year sat at 4.2% seasonally adjusted, and 3.7% unadjusted. Between January and July 2021, the seasonally adjusted unemployment rate was 6.5%, and 6.3% when not adjusted.
Road ahead
In a release, DBEDT director Mike McCartney says the state is expected to exceed $100 billion in GDP for the first time ever in 2023.
But the state economy isn't quite there yet. McCartney says the slowdown in construction and real estate activity has been challenging. This is partly caused by the ongoing supply chain issues, and inflation — which both will have a larger effect.
While this will add further uncertainty in Hawaiʻi's economic recovery, and the daily lives of residents, the department believes the state's economic outlook will remain better than the U.S. That's because a Blue Chip Indicators report expects economic growth in the U.S. to slow to 0.7% in 2023 — with a 50% chance the economy will enter a recession.
The full report can be found at dbedt.hawaii.gov/economic/qser
