Anticipated modest expansion in Hawaii's economy projected up to 2026

Hawaii's Economic Outlook Remains Stable, According to DBEDT

The state Department of Business, Economic Development and Tourism (DBEDT) has published a new quarterly economic outlook for Hawaii, confirming that while the pace of growth will slow in the near term, the long-term fundamentals remain intact.

According to DBEDT Director James Tokioka, Hawaii's economy, measured by the value of all goods and services after adjusting for inflation, is expected to grow 1.3% this year. This growth would represent an additional nearly $1.2 billion of economic activity in the roughly $91 billion local economy.

The high U.S. tariffs on global imports are expected to cause inflation to be higher than an optimal level around 2%. However, the new forecast expects lower inflation in Hawaii compared to the prior forecast, with an estimated 3% rise in costs this year and 2.8% next year.

DBEDT's revised forecast for 2021 economic growth is 1.3%, slightly higher than the previous 1.2% forecast. The department has also increased its full-year outlook for job growth to 1.4% compared with 0.9% in its prior forecast.

The growth in the economy is attributed to steady job gains, construction, and solid visitor spending. DBEDT expects higher visitor spending than previously forecast, with a growth of 2.3% this year instead of 1.3%.

The value of private construction authorized by permits in the first seven months of 2021 surged by 33.4%, or $843 million, compared with the same periods last year. Government construction contracts also increased by 31.2% in the first half of 2021.

Hawaii's labor force increased by 1.3% percent this year through July. The economy is expected to grow 1.4% in 2026, 1.6% in 2027, and 1.8% in 2028.

The government responsible for the policies influencing Hawaii's long-term economic growth in the coming years is the United States federal government. Hawaii's non-agricultural wage and salary jobs growth underscores broad-based job growth. Federal job losses in Hawaii have been offset by private sector and state and local government job gains.

DBEDT notes that while the pace of growth will slow in the near term, construction, steady job gains, and solid visitor spending are expected to provide stability to Hawaii's economy through 2027. The economy, like the rest of the country, is navigating a period of slower growth and rising prices.