Bay of Plenty's economic performance after Covid-19 is outperforming the rest of New Zealand, a new report has found.
The trend was in part thanks to a "boon" from Provincial Growth Fund projects in the region.
However, underlying challenges remain.
The Bay of Connections update was presented to the Bay of Plenty Regional Council Strategy and Policy Committee yesterday at Regional House in Tauranga.
The Bay of Connections supports economic development in the Bay of Plenty and has spent 12 months focusing on supporting the region's Covid-19 response.
It found that although the region's economy was largely bouncing back well from lockdown, more work was needed to address a constrained labour market.
In the update, regional economic development programme manager Dean Howie said strong demand for primary sector exports, a large healthcare sector "and booming construction industry has provided the Bay of Plenty economy with a level of resilience not seen in other regions".
Infometrics data showed the Bay of Plenty at or slightly better than the nation's average across several key indicators, including GDP.
The Bay's GDP was down 0.02 per cent for the year to March 2021 compared to a drop of 3 per cent across New Zealand.
Areas of growth in the Bay included non-residential consents increasing 76.8 per cent compared to 5.3 per cent nationally and house values were up 21.5 per cent compared to 18.2 per cent nationally.
A further breakdown revealed Bay of Plenty's tourism expenditure was down 9.9 per cent compared to 16.6 per cent nationally; consumer spending was down 0.2 per cent compared to 3.8 per cent and car registrations were down 4.3 per cent compared to 19.2 per cent.
"While our regional economic picture looks positive at a higher level, some sectors - predominantly tourism - and related industries are still experiencing significant challenges."
Howie said feedback from Economic Development Agencies (EDAs) reflected there was confidence in the economy "backing up what we are seeing in the data".
However, despite the overall strong performance of the region, disparities within the Bay area remained. Howie said the recent sale - and salvage - of the Whakatāne Mill and closure of Norske Skog mill in Kawerau resulting in 160 lost jobs were examples.
"While the Bay of Plenty economy shows signs of positivity and resilience, underlying challenges remain."
Howie said addressing labour market challenges was a key focus.
In the year to March, the number of people on Jobseeker Support increased by 38.5 per cent and Covid was believed to be a key factor in displacing many employees.
"Despite this increase, labour market constraints are beginning to bite with EDAs and business organisations increasingly vocal on the scarcity of skilled labour."
Howie said domestic tourism spend had gone some way to helping the economy but housing availability and affordability also continued to be an issue.
"A boon for the regional economy has been the implementation of projects by the Provincial Growth Fund, the most visible examples of which are the recently completed Rotorua lakefront, work on the Whakatāne and Ōpōtiki harbour developments and the opening of the Whakatohea mussel-processing factory in Ōpōtiki."
Howie said the reformed Provincial Development Unit, now known as Kānoa - Regional Economic Development and Investment Unit - was working to identify potential priority areas for investment from the $200 million Regional Strategic Partnership Fund.
A Regional Skills Leadership Group established in June 2020 focused on four "priority sectors for our region": horticulture, forestry, healthcare and technology. A permanent version of this group was expected to be established by the end of this month to develop regional workforce plans to help address labour market challenges.
Howie told councillors that although lots of jobs were coming up the "jobseeker numbers are quite up there".
He also said housing in the region was a major issue.
"It's not something we blame ourselves for but it can be a barrier to attracting people in the labour market," Howie said.
Bay of Connections Leadership Group chairman Tim Hurdle said although the regional economy was "reasonably resilient" areas such as tourism continued to experience pressure after the Covid outbreak.
"We need to be mindful of the ongoing effect of Covid. The Delta variant has a high probability of coming through the border and that could have a significant impact on the economy."
In his report, Howie said Bay of Connections had developed a work programme expected to deliver several projects addressing regional issues and connecting EDAs with councils and other stakeholders to "maximise region-wide benefits".
A progress report was expected to be presented to the Strategy and Policy Committee in October.