Hawaii’s COVID-19 hobbled economy is outperforming previous dire predictions and is expected to generate nearly $6.3 billion in tax revenue for the fiscal year that ends in June, although still down 6.5% from last year, the state Council on Revenues plans to tell Gov. David Ige.
And for the 2022 fiscal year, the Council on Revenues on Thursday projected an economic turnaround that will see positive growth of 6.5%.
The new forecasts are the result of a combination of factors: hopes that the incoming administration of President-elect Joe Biden will get control of the COVID-19 vaccine by a faster rollout of vaccinations and testing that will encourage more visitors to travel to Hawaii, in addition to an already unexpected “pent-up demand” for island travel that outperformed earlier forecasts — along with 40,000 people who got jobs in November alone.
“The economy has been performing substantially better than the council forecast,” said council member Carl Bonham, executive director of the University of Hawaii Economic Research Organization.
In the 2019 fiscal year before COVID-19 derailed Hawaii’s tourism-reliant economy, the state saw $7.14 billion in tax revenue. In the fiscal year that ends in June, the Council of Revenues expects to see tax revenues of $6.26 billion, down from $6.69 billion in fiscal year 2020.
The new numbers for the rest of the year and into the 2022 fiscal year are based on the assumption that COVID- 19 numbers will go down locally and nationally.
The forecasts are “really because of a new administration that would actually have a unified plan,” Bonham said. “We’re not back to normal … but as people get vaccinated, there’s going to be more willingness to travel.”
There remain dark aspects of Hawaii’s economy, such as businesses that have closed and will never reopen, said council Vice Chairwoman Marilyn Niwao.
And Bonham said island people at the lower end of the economic scale continue to suffer disproportionately while those at the upper end continue to accumulate savings.
But in the era of COVID- 19, Bonham also expects to see restaurants opening “pop-up” locations, along with “new business creation.”
Overall, unexpected numbers of tourists are driving signs of Hawaii’s nascent and unexpected economic recovery.
“Things are looking up, things are looking better,” said council member Kristi Maynard. “I’ve been pleasantly surprised by the most recent numbers.”
January and February, traditionally slow months for Hawaii tourism, are expected to remain sluggish.
“Then you start seeing the rebound in April, May and June,” Bonham said.
The latest forecasts are based on a turnaround in the nation’s COVID-19 numbers that will give visitors confidence to travel to Hawaii through “a well-thought-out plan to vaccinate people,” Bonham said.
By December, if all things go well, Hawaii should see 20,000 visitor arrivals per day, Bonham said, or about 70% of previous, record- setting levels in 2019 before the pandemic strangled Hawaii’s economy.
The state Department of Business, Economic Development and Tourism is even more bullish, Bonham said, and is forecasting an 80% return of visitor arrivals in December.