Hawaii’s slow-growth economy is expected to continue

Stop if you’ve heard this before, but the latest forecast for Hawaii’s economy is calling for slow and steady growth.

In what is becoming a recurring theme in local economists’ quarterly reports, the state’s economy is projected to keep inching forward with its gross domestic product — the total value of the state’s goods and services — growing from 1.2% to 1.4% annually over the next four years, according to a new economic forecast by the state Department of Business, Economic Development and Tourism. Hawaii’s GDP, which grew just 1% in 2018, has averaged 2% growth over the last 20 years.

“Hawaii has been experiencing lower but stable economic growth during the last two years as reflected by declining visitor spending and increasing construction value,” DBEDT Director Mike McCartney said. “Our labor market continues to perform well with the unemployment rate still among the lowest five states in the nation during the first four months of 2019.”

Tourism, the lifeblood of Hawaii’s economy, is expected to keep growing — albeit slowly — with visitor arrivals projected to finally reach the much-anticipated 10 million mark this year after falling short by just 45,452 in 2018 at 9.95 million. DBEDT projects arrivals to rise 2.6% this year for an eighth straight record and end the year with 10.2 million arrivals. DBEDT’s forecast was revised upward from the 2% increase it forecast in its previous report in March.

Visitor spending, which is down 2.4% through three months this year, is forecast to rise 1.1% to $17.96 billion, also an eighth straight record. But that is lower than the 3.3% projected last quarter.

Nonfarm payrolls jobs, which increased 3,200 during the first four months of this year, are projected to rise 0.6% in 2019. Personal income, adjusted for inflation, is seen rising 1.5%.

The state economists lowered their projection for inflation to a mild 1.7%, down from 1.9% in their earlier forecast.

Hawaii’s unemployment rate for the year was revised upward to 3% from 2.7% in last quarter’s forecast and is expected to keep climbing until it hits 3.6% in 2022.

DBEDT said highlights during the first few months of this year included the total value of private building permits rising 8.7% during the first quarter and state government spending on capital improvement projects gaining 12.5% during the same period.

In addition, the state general fund revenue increased 7.6% during the first four months of 2019, with general excise tax gaining 9.3% and individual income tax rising 5.4%. The two categories of taxes accounted for 85% of the state general fund revenue. The general fund revenue collected during the first four months was a record high for the first four months of a calendar year.