UHERO: ‘Moderately strong growth’ for Hawaiʻi’s economy tied to international visitors
Hawai’i researchers in a new report anticipate “moderately strong growth” for Hawaiʻi’s economy, buoyed by the return of international visitors.
The outlook comes even though conditions are worsening for the US and global economies, according to University of Hawaiʻi Economic Research Organization’s second quarter forecast for 2022.
Released today, the report said that Hawaiʻi’s tourism recovery quickly bounced back after the omicron wave receded.
Visitor arrivals will surpass 90% of pre-pandemic levels by year’s end, and real visitor spending will be a third higher than last year, helped by the return of higher-spending international visitors.
However, inflation is the highest in decades and will burden economic growth until it returns to trend over the next two years.
Inflation in Hawaiʻi hit 7.5% in March, measured by the Honolulu consumer price index, only a bit lower than for the U.S. overall. It raised household costs by an average of $3,600 and also raised business production costs.
“Were it not for the anticipated return of international visitors, we would be marking down our forecasts because of the combined effects of war, inflation, supply bottlenecks, and pending fed interest rate hikes,” UHERO said in a news release. “While we think ongoing tourism recovery will offset these forces in Hawaiʻi, they nevertheless represent an increasing recession risk.”
Other highlights of the report include the following:
- Homebuyers are being squeezed both by surging home prices and mortgage rates that have risen by more than 2 percentage points since last summer.
- After a second-half pause last year, the labor market has begun to edge upward again. Hawaiʻi’s nonfarm payroll job count will rise by more than 4% this year, continuing at a healthy pace in 2023.
- Potential for US and global growth has worsened since UHERO’s last forecast in March. The Russian war on Ukraine has spiked energy and commodity prices, while supply chains are again threatened by COVID-19 shutdowns in China. The Federal Reserve is pursuing a rapid pace of monetary tightening in the face of the highest inflation in decades. These factors will restrain global growth for the next several years and significantly raise recession risks.
- Real personal income has fallen with the end of pandemic fiscal support, and inflation will also take a toll. Real income will decline 5% this year and recover less than 1% in 2023. Employment gains and a tight labor market will boost a return to moderate income growth by 2024. Real gross domestic product, the broadest measure of production, will rise 3.5% this year and approach its pre-COVID peak by the middle of 2024.
To view the report, visit UHERO’s website.