Hawaii’s battered economy last year may not have been as bad as previously estimated, and recovery this year should be a bit stronger, a new state report says.

The state Department of Business, Economic Development and Tourism estimates that Hawaii’s real gross domestic product fell by 7.9% last year as the state contended with the coronavirus pandemic.

Such a drop, representing a $6.5 billion decrease in the value of all goods and services adjusted for inflation, is a preliminary calculation. However, it’s smaller than a prior estimate DBEDT made in December projecting that Hawaii’s economy would contract 11.7% last year.

Furthermore, DBEDT’s new assessment projects that Hawaii’s GDP this year will rise 2.7%, or by $2 billion, instead of 2.1% as the agency estimated three months ago.

The agency’s brighter outlook also compares with a more dour University of Hawaii Economic Research Organization report in December that anticipated a 0.1% improvement in Hawaii’s economy this year.

“It has been one year since the onset of COVID-19 and it’s been a tough and challenging time for all of us,” DBEDT Director Mike McCartney said in a statement. “I can see positive and encouraging signs ahead for Hawaii’s economic prosperity with Hawaii’s Safe Travels program fully in place and the aggressive rollout of our statewide vaccination program, coupled with the fact that we have the lowest number of new COVID-19 cases in the country.”

McCartney also noted that Oahu recently improved to a Tier 3 safety protocol, allowing more commerce and community activity, and that the state is on a path to reopen public schools and receiving more visitors.

“Given all these signs, I am now more optimistic about Hawaii’s social, environmental, and economic prosperity in the future,” he said.

DBEDT’s revised economic outlook was published Monday in a report that contains projections for visitor arrivals, unemployment, personal income, population growth and other factors affecting the economy.

If the agency’s new estimates are on the mark, Hawaii’s economy this year would be 5.4% weaker than in 2019.

DBEDT projects that it will take until 2023 for the state economy to become as big as it was in 2019, after adjusting for inflation, based on expected real GDP growth of 2.7% this year, followed by 3.3% next year and 2.3% in 2023.

DBEDT’s more positive estimates are largely based on additional federal aid flowing to the state, rising visitor arrivals and improving COVID-19 case and vaccination rates.

The agency noted that individuals, along with public and private entities including government agencies, businesses and nonprofit organizations, in Hawaii were allocated more than $10.6 billion in federal funds last year.

This aid included a second economic stimulus package that provided $600 to individuals meeting certain income limits, an extra $300 a week in unemployment benefits and a new round of forgivable loans to businesses for payroll and other expenses.

DBEDT also expects Hawaii will receive more than $7 billion in federal funds this year.

The agency said Hawaii’s Safe Travels Program accommodated 496,186 visitors from October to December, representing roughly 20% of the visitor volume in the same period in 2019 before the pandemic.

Such a low level of visitors is a huge blow for the state’s biggest industry, but it compared with 2% from April to September and has been improving this year.

Tourism is expected to drive much of the anticipated economic growth statewide. DBEDT projects that the number of visitors to Hawaii will roughly double to 5.5 million this year from 2.7 million last year. In 2019, 10.4 million tourists came to the state.

Eugene Tian, head of DBEDT’s research and economic analysis division, said visitor arrival numbers in February were much better than expected at nearly 9,000 a day on average.

“That is encouraging,” he said. “It is better news.”

February visitor arrivals were higher than in any month since the Safe Travels program began in October, even though visitor arrivals historically are typically higher around the end of the year during the holiday season.

DBEDT forecasts visitor arrivals will rise to 8.3 million next year and 9.2 million in 2023.

Tourism’s rebound in the short term is expected to improve with more travelers receiving the coronavirus vaccine.

DBEDT said about 18% of Hawaii’s population and 15% of the U.S. population had been vaccinated as of Sunday, and Tian expects a majority of Americans will be vaccinated by summer.

Unemployment in Hawaii is forecast by DBEDT to settle at 8.2% this year, down from 12% last year, and then continue improving to 6.9% next year and 6.2% in 2023. Unemployment was 2.7% in 2019.

Personal income, after accounting for inflation, is expected to drop this year by 4.3% after a 7.1% increase driven in part by federal stimulus payments, according to the report. Personal income next year is expected to tick up by 0.2% and then 1.2% in 2023.

Inflation is expected to be about 2% annually over the next three years.

Little change is expected in Hawaii’s population of roughly 1.4 million people.

DBEDT estimates that the number of Hawaii residents slipped by 0.6% last year, representing a net decrease of 9,000 people. This year the agency projects a loss of 1,000 people, followed by gains of 2,000 people next year and then 3,000 people in 2023.

The next DBEDT forecast, which would include a final measurement of Hawaii’s economy last year and a revised look ahead, is scheduled to be done in the second quarter.