An improved outlook for Hawaii’s recovering economy is forecast by University of Hawaii researchers, and the view is even brighter than one published Monday by the state.

The University of Hawaii Economic Research Organization predicts in a report authorized for release today that the value of all goods and services produced statewide will grow by 3.7%, or $3.28 billion, this year after accounting for inflation.

UHERO’s expected growth for this broad measure of the economy, known as real gross domestic product or GDP, is $1.28 billion more than what the state Department of Business, Economic Development and Tourism forecast in a report Monday.

It is also far better than scant 0.1% growth UHERO forecast in a December report.

“It is a better recovery than we were (previously) expecting,” said Carl Bonham, UHERO executive director.

Bonham said GDP growth this year will benefit many residents and businesses as well as the public sector. However, the gain is compared with a horrible level last year due to COVID-19 impacts.

UHERO estimates that Hawaii GDP, even with massive amounts of federal stimulus, shrank by $7 billion to $90 billion last year from $97 billion in 2019.

The organization forecasts that a full recovery of Hawaii’s economy to pre- coronavirus pandemic levels in 2019 won’t occur until 2023, with 3.7% GDP growth this year followed by gains of 3.1% next year and 1.4% in 2023.

DBEDT also predicts a full recovery happening in 2023. In UHERO’s December report, a full recovery was not expected by 2023.

Bonham said main drivers of UHERO’s brighter outlook since December include additional federal aid that appears on the way, more federal aid received this year, more optimistic vaccine deliveries and subsidence of a COVID-19 surge on the mainland.

All these things, along with visitor arrivals that were higher in February than any month since Hawaii’s Safe Travels program began in October, give Bonham some faith that actual GDP growth this year will top UHERO’s new forecast.

“It won’t surprise me if we see stronger GDP growth than that,” he said.

UHERO’s report contains a most likely scenario as well as more optimistic and more pessimistic forecasts. Although there is considerable uncertainty with all three, Bonham said that for the first time he feels strong about the more optimistic scenario.

In this extra-bright outlook, Hawaii’s economy would make a full recovery next year with GDP gains of 4.1% this year and 3.8% next year.

Factors making this iffy include the behavior of COVID-19 strains, the power of vaccines against them and how the state manages tourism in a new world of vaccinated travelers.

Bonham noted that tourism represents 17% to 18% of Hawaii GDP, and that the number of residents returning to work grew by 20,000 from October to November but hasn’t budged significantly since then.

“We need another leg up in visitor spending and activity to get another 20,000 people back to work, or 30,000 people,” he said.

UHERO predicts that about 5 million visitors will come to Hawaii this year, up from 2.7 million last year but down from a record 10.4 million in 2019. Visitor arrivals should reach 8 million next year and then 8.9 million in 2023, the report said.

Hawaii’s unemployment rate is forecast by UHERO to be 7.1% this year, down from 12% last year, and then continue improving to 4.4% next year and 3.8% in 2023. Unemployment was 2.7% in 2019.

Personal income, after accounting for inflation, is expected to drop this year by 1.1% after an estimated 4.3% increase last year driven by federal stimulus payments, according to UHERO. Personal income next year is expected to fall 3.1% before ticking up 1.9% in 2023.