The latest economic forecast from the Department of Business, Economic Development and Tourism (DBEDT) indicates a somewhat steady trajectory for Hawaii's economy over the next few years. In a report released earlier, DBEDT projects a 1.3 percent increase in Hawaii's economy for 2025, with an anticipation of stronger recovery by 2027. Despite the expected growth, the state faces headwinds in the form of rising tariffs and policy uncertainty, contributing to inflationary pressures toward the latter part of 2025 and into 2026, according to a statement made by DBEDT.
It's not all clouds on the horizon, though, as certain sectors showcase the potential to buoy the state's financial health. Construction, health care, and professional services are driving the growth, and while tourism—a key component of Hawaii's economy—is rebounding at a slower rate, steady gains continue to offer some optimism for this vital industry. The labor market also flexes its muscles, with the state boasting the third-lowest unemployment rate as of July 2025, tied with North Dakota.
On the construction front, Hawaii’s building sector has been consistently expanding, despite a noted decrease in state government capital improvement project expenditures. Yet, private building activity thrived, evidenced by a significant spike in statewide authorizations. That said, costs are on the uptick too, with the Honolulu Construction Cost Index marking increases for both single-family residences and high-rise buildings in the first quarter of 2025.
The tourism sector, while slower to climb back to former glory, has witnessed increments in visitor arrivals and spending in the first half of 2025. Domestically, travelers are leading the charge with a 3.5 percent increase in the same period. Still, international travel remains more toned-down, with a slight dip in arrivals year-to-date. The hospitality industry is keeping a watchful eye on mid-year figures, hinting at a potential lull come July. Despite a slip in arrivals and spending at that time, the overall visitor industry growth in the first half of 2025 cannot be ignored.
DBEDT's inflation watch elicits some concern, with expectations of heightened pressure in the second half of 2025 and into the early following year. These challenges come as Hawaii, along with the rest of the globe, navigates the somewhat choppy waters of post-pandemic recovery shaped by varied national and international economic conditions. DBEDT Director James Kunane Tokioka underscored the sentiment of cautious optimism, stating, "Hawaii’s economy, like the rest of the country, is navigating a period of slower growth and rising prices. Our forecasts confirm that while the pace of growth will slow in the near term, Hawaii’s long-term fundamentals remain intact," as reported by DBEDT.
The forecast for GDP growth in Hawaii sits at 1.3 percent for 2025 and is expected to reach 1.4 percent in 2026, with a gradual climb to 1.8 percent by 2028 as the state recovers from tariff impacts and inch closer to its economic potential. Visitor numbers too are anticipated to crest at the 10 million mark by 2028, a significant milestone for the archipelago’s tourism-reliant economy. On the income front, personal income is expected to jump from $105.1 billion in 2025 to $119.3 billion in 2028. Reflecting these comprehensive reports, the future seems a mix of challenges and measured growth for Hawaii’s financial outlook.
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