Just when it looked like Hawaii’s economy was going to make significant strides toward recovery, the emergence of the omicron variant, renewed international travel restrictions and higher inflation have dampened the state’s rebound.

University of Hawaii economists said in a report due out today that the rapid global spread of the omicron variant poses risks to the state’s recovery and that new travel restrictions have pushed back their forecast for the return of international visitors.

But the University of Hawaii Economic Research Organization said in its report that the good news for Hawaii is that its very high vaccination rate should provide some protection, along with new treatment that will reduce the severity of health impacts.

“Our underlying economic fundamentals are strong,” UHERO said. “But it is increasingly clear that COVID-19 will not just go away, and that efforts to adapt to ongoing risks will be key to a sustained recovery.”

UHERO forecasts that the state’s economy, as measured by the inflation-­adjusted gross domestic product, will grow 5.8% this year before slowing to 2.7% in 2022 and then accelerating to 3.6% in 2023. The GDP, which is the broadest measure of the economy, represents the value of all goods and services.

With new restrictions limiting the influx of international visitors to Hawaii, UHERO lowered its overall arrivals projection to an increase of 149.2% this year, 22.8% in 2022, 12.5% in 2023 and just 2.7% in 2024. That compares with its forecast in its September report for a 142.9% gain this year, 29.8% in 2022, 8.8% in 2023 and 4.4% in 2024.

“Just as the Delta wave was receding in the rear-view mirror, Omicron has reared its ugly head,” UHERO said. “Whether this will turn out to be a painful or relatively benign episode in the pandemic, its immediate impact on travel restrictions within key visitor markets means a poorer near-term outlook for international visitor recovery.”

UHERO said the net effect is that the state’s tourism outlook is poorer than UHERO saw in its last forecast, and that it will spill over to the broader economy and suppress the pace of gains in the labor market and overall economic activity.

“Hawaii’s high vaccination rate places us in a better position to weather an Omicron wave than many other U.S. states,” UHERO said. “Still, if the COVID-19 variant proves severe or able to jump vaccination protections, tourism and the local economy will see setbacks in coming months.”

With the state experiencing a shortage of workers, UHERO lowered its forecast for nonfarm payrolls to a gain of 2.3% this year and 4.6% next year, compared with its earlier projections of 2.7% and 5.2%, respectively.

“We expect ongoing moderate job gains heading into the New Year, but several factors will weigh on progress, including continuing labor shortages, the end of pandemic fiscal and monetary support, and higher inflation,” UHERO said.

Still, the economists projected that the statewide unemployment rate for this year will be 7.7% and 5.4% in 2022. Those are lower numbers than the 8.3% and 6.8% rates, respectively, projected in its September forecast.

The economists offered a mixed outlook on inflation-­adjusted personal income, with a 0.8% increase this year but a 5.7% drop in 2022. That compares with its previous forecast of a dip of 1.1% this year and a drop of 4.9% in 2022.

UHERO revised upward its forecast for inflation-adjusted visitor spending to a gain of 159.5% this year and 31% in 2022, compared with its earlier forecast of 134.9% this year and 25.7% in 2022.

Inflation is expected to eat into consumers’ wallets, with UHERO revising higher its projected rate for this year to 3.9% from its earlier forecast of 3.2% and its rate for 2022 to 3.8% from its previous projection of 3%.

But UHERO said Hawaii is resilient enough to ultimately overcome the headwinds.

“The very high rate of vaccination will certainly provide more protection for its residents than many other states enjoy, even if it turns out to be somewhat less effective against the Omicron virus strain,” UHERO said. “For the visitor industry and its many employees, the picture is a mixed bag: new travel restrictions will hurt visitor numbers in the short run, but the U.S. market has proved surprisingly resilient. This should help us limp through a little longer until international visitors return. And there is no doubt that these higher-­spending visitors will be back; it’s just a question of when and how quickly.”