Hawaii’s economy recovery is stumbling from consequences of surging COVID-19 cases, and state economists predict the negative impact will ripple along for a few years.

The University of Hawaii Economic Research Organization calculates that the setback in the state’s economic rebound began last month in tandem with a stunning rise in coronavirus cases and has only slipped further since then.

UHERO’s Economic Pulse model shows that the local economy as of the week ended July 17 had recovered to 75% of what it was pre- pandemic following a nose dive early last year. But at the end of last week, with record coronavirus case levels, the economy is at 66% of what it had been in early 2020.

On Thursday the state Department of Business, Economic Development and Tourism said it expects the pace of Hawaii’s economic recovery to be slower through 2024 compared with a forecast it issued in May.

“Hawaii’s economy was on a clear path towards recovery and was gaining momentum over the first seven months of 2021,” Mike McCartney, the agency’s director, said in a statement. “Due to the rapid spread of the delta variant, this new spike in COVID-19 cases has created economic uncertainty.”

DBEDT in May forecast that the state’s economy would grow by 3.5% this year. Now it expects 2.7% growth.

Both figures are adjusted for inflation, which is on the rise.

The difference between 3.5% and 2.7% growth equates to roughly $620 million less spending in Hawaii’s $82 billion economy as measured in 2012 dollars.

“It’s not like negative growth,” explained Eugene Tian, the state’s chief economist. “It’s just a smaller growth. Without the delta variant we thought our recovery would be much faster.”

This year’s economic growth outlook cut back by 0.8 percentage point is followed by 0.2-percentage- point smaller growth expected in each of the next three years. This change from 2022 to 2024 amounts to about $900 million a year, putting the cumulative four-year reduction at about $1.5 billion.

Tian said the anticipated drops are driven partly by the expectation that residents will be spending less as coronavirus threats or existing restrictions keep them from going to restaurants, retail stores and other places.

DBEDT’s forecast does not assume any future new restrictions on travel or business operations, so if such things are imposed, then it would mean even greater negative economic impacts.

DBEDT’s report noted a small decline in visitor arrivals this month, but that isn’t a factor for weaker expected economic growth. That’s because the agency in its May forecast underestimated how many tourists would come in recent months, so the new forecast includes a higher number of total visitors and visitor spending this year.

So really, the “kamaaina economy” is producing the weaker outlook.

Inflation also is playing a role in DBEDT’s slumped forecast. This measure for the rising cost of goods and services is projected to be 3.1% this year, up from 1.6% in each of the past two years.

Inflation this year is largely being driven by electricity and gasoline because of higher oil prices, and can result in people spending less on other things because more of their income is going to electricity and gas. Rising inflation also can entice people to buy more things in the near term as a strategy to avoid paying higher prices for those things later, Tian noted.

DBEDT expects inflation will fall to 2.3% next year before returning to its 2% long-term average in 2023 and 2024.

Other projections in DBEDT’s report peg the unemployment rate this year at 7.6%, an improvement from 11.6% in 2020 that represented a spike from 2.5% in 2019. DBEDT forecasts unemployment will fall to 6.4% next year, 5.4% in 2023 and 4.7% in 2024.

Nonagricultural payroll jobs are forecast to rise 4.9% this year, 6.4% in 2022, 1.9% in 2023 and 1.3% in 2024.

Personal income after adjusting for inflation is expected to dip 1.7% this year after a 5.4% gain in 2020 driven by enhanced unemployment benefits, then slip 2.5% in 2022 before growing again by 0.9% in 2023 and 1.2% in 2024.

Visitor arrivals are projected to end this year at 6.8 million, representing a roughly 65% recovery from 2019’s record 10.4 million. The total is projected to be 8.8 million in 2022, followed by 9.6 million in 2023 and 10.2 million in 2024.

McCartney said everyone getting vaccinated and wearing a mask would have a positive effect on Hawaii’s economy.

“In order to regain our economic momentum and to malama (care for) Hawaii with mutual respect and aloha, I humbly ask for everyone’s help and cooperation to follow our public health protocols by getting vaccinated and wearing a mask,” he said. “If we do just this, our economic future will be much brighter, balanced, sustainable with more certainty and diversity.”