Economy of Alaska

GDP: Alaska’s total GDP in 2023 was $65.7 billion, a significant record, but given inflation its real GDP has been in a now slowing long decline that began in 2012 where its GDP was $60.9 billion. Alaska’s real GDP showed most recently a 3.6% (by quarter compounded annually) increase placing it 43^rd in real GDP growth nationally sustaining a positive trend since Q2 2022. Many factors have contributed to this decline, notably oil price collapses, housing bubbles, the Covid-19 pandemic, and advancing technology as Alaska’s infrastructure lags behind the rest of the U.S.

Source: Bureau of Economic Analysis Q3 2021 release table SQGDP1 sorted for Alaska Real GDP and Current Dollar GDP
https://www.bea.gov/news/2023/gross-domestic-product-state-and-personal-income-state-3rd-quarter-2023



 

COL: Alaska’s lower GDP per capita income is also lower than the national average because of the high commodity prices. As Alaska has almost no local manufacturing or farming production most of its goods must be shipped in, resulting in higher average commodity prices for most items. Anchorage, which pays the lowest overall consumer prices in Alaska, has a Cost of Living of 26.7% higher than U.S. averages and has been normalizing towards U.S. averages slowly. Alaska ranks highest among the states for total annual food costs, and healthcare costs. 

Source: AEDC 2022 year end report Anchorage, Alaska Cost of Living Index
https://aedcweb.com/wp-content/uploads/2023/05/2022-Q4-COLI-Report-V2.pdf

Economic Drivers: Military activity given Alaska’s strategic location has long been a boon to local economies in both Anchorage and Fairbanks. Alaska also boasts a unique tourism sector, that has seasonality challenges. Its industrial outputs are crude petroleum, natural gas, coal, gold, precious metals, zinc, other mining, and seafood processing. Oil has of course played an extremely impactful role in the development of the states budget.

Export Import Dynamics:
Exports In 2023, United States' Alaska exported $5.58B. In 2023 the top exports of Alaska were Zinc ores and concentrates ($908M), Gold in unwrought forms non-monetary ($775M), Fish meat, excluding fillets, whether or... ($440M), Lead ores and concentrates ($406M), and Fish fillets: frozen, Alaska pollock ($326M). In 2023 the top export destinations of Alaska were China ($1.17B), Japan ($710M), South Korea ($702M), Australia ($602M), and Canada ($596M). Its fastest growing export destinations in 2023 was Taiwan, Australia, and South Korea. Meanwhile its fastest declining export destinations were China, Switzerland, and Canada.

Imports In 2023, United States' Alaska imported $3.75B. In 2023 top imports of Alaska were Light petroleum distillates ($1.74B), Communication apparatus ($183M), Parts and accessories of data processing ($82.1M), Petroleum spirit for motor vehicles ($78.2M), and Commodities not specified according to kind ($71.5M). In 2023 the top import origins of Alaska were South Korea ($1.46B), Canada ($753M), Thailand ($179M), Japan ($159M), and Vietnam ($111M). Fastest growing import origins in 2023 were Vietnam, Malaysia, Thailand, and fastest declining were South Korea, Canada, and China.
In December 2023 Alaska exported $227M and imported $223M, resulting in a positive trade balance of $4.37M. Between December 2022 and December 2023 the exports of Alaska have decreased by $-92.6M (-29%) from $319M to $227M, while imports increased by $31.4M (16.4%) from $191M to $223M. Most notably due to the decrease in exports to China

Source: Export statistics from the Observatory of Economic Complexity
https://oec.world/en/profile/subnational_usa_state/ak

State Budget: Since 2012 Alaska’s state budget has operated in a deficit, averaging around $1 Billion annually. Much of the states budget was highly dependent on resource extraction, particularly oil, and as oil prices fell in 2012 so too did Alaska’s budget deficits. Wartime has increased oil prices creating in 2022 and 2023 a budget surplus of around $3.4 billion. Alaska also receives significant federal funding for a large portion of its annual budget, specifically in health and education. Including the federal fund the budget can be seen in the following graphic:

Consular Office of Japan in Anchorage, Alaska; Data Source: Alaska Division of Legislative Finance Operating Budget Totals
Alternative graphic for more information https://alaskapolicyforum.org/2023/09/alaska-fiscal-year-2024-budget-blocks/

Alaska PFD: Alaska possesses a unique form of Universal Basic Income called the Alaska Permanent Fund, which came into law in 1976 via a constitutional amendment Article IX, section 15. Which initially took 25% of all resource based proceeds and allocates them to an income producing investment fund. The APF pays to all qualifying Alaska residents a dividend annually a varied amount depending on economic and political circumstances. In 2018 a law was passed that allowed the state to dip into the constitutionally protected permanent fund that today sits with over $56.7 billion dollars in principle alone. Today Alaskan politicians are hotly debating use of the fund to cover portions of the state budget.

Graphic Source: Consular Office of Japan in Anchorage, Alaska; Data Source: Alaska Department of Revenue PFD data https://pfd.alaska.gov/Division-Info/Summary-of-Dividend-Applications-Payments

Economic Outlook: Alaska state budget is highly dependent on its success in bringing large resource extraction projects (LNG, Oil, or Critical Minerals) into operation or establishing alternative means of revenue through one, or many, of its other valuable economic sectors such as tourism. Various projects, such as the Willow project, the Alaska LNG project, Qilak LNG, etc. have potential to bring wealth back to the state if they can receive necessary initial investments to become operational. The seafood industry is currently facing serious turmoil requiring significant adaptation in the wake of the China trade wars, Russian war financing through overfishing, and climate impacts.

External Data Sources: