Florida’s economic growth, driven by real GDP, is projected to slow by 2028 due to Federal Reserve interest rate hikes and a slowing net migration rate, according to a new report published by Florida TaxWatch.

Florida’s economic growth is projected to slow down over the next five years, according to a report published on Thursday by Florida TaxWatch in collaboration with the Regional Economic Consulting Group.

The report forecasts that Florida’s real GDP growth rate, which was 4.6 percent in 2023, will decrease to 2.1 percent in 2024 and further drop to 1.6 percent in 2025. By 2027 and 2028, the growth rate is projected to stabilize slightly at 1.9 percent. This moderation follows a period of rapid post-pandemic recovery, transitioning into a phase of more sustainable growth.

“Florida’s economic growth, expressed as real GDP, will continue to grow through 2028, albeit at a reduced rate,” the report states.

Several factors contribute to this anticipated deceleration, including the Federal Reserve’s efforts to curb inflation by raising interest rates have a cooling effect on economic activity. These measures, aimed at controlling inflation, are expected to reduce consumer spending and business investments, thereby impacting GDP growth. Additionally, the net migration rate to Florida is slowing, which could further influence economic expansion.

In parallel with GDP trends, personal income growth in Florida shows a mixed trajectory. Personal income per capita grew by 5.0 percent in 2023, and while the growth rate is expected to peak at 6.2 percent in 2025, Florida TaxWatch projects the figure to taper off to 4.8 percent by 2028.

Moreover, the labor market in Florida continues to expand, with employment projected to rise from 9.8 million in 2023 to 10.4 million by 2028. Despite this increase, the unemployment rate is expected to climb from 2.8 percent in 2023 to 4.3 percent in 2026, before slightly declining to 4.2 percent by 2028. The initial rise in unemployment is attributed to the Federal Reserve’s inflation control measures, which include higher interest rates to temper economic activity and inflation.

“Given the Federal Reserve’s role in achieving sustainable employment rates, when unemployment rates become too high, interest rates are lowered as a way to stimulate job creation,” the report says. “Conversely, when unemployment rates become too low, interest rates are increased as a way to stem inflation.”

The report also notes that high-income sectors like technology, finance, and professional services are expected to continue their growth, contributing to higher average incomes. The tourism sector, which remains a cornerstone of Florida’s economy, also plays a significant role. In 2022, Florida hosted 137.4 million visitors, who spent a record $124.9 billion, averaging $333 million per day.