When forecasting economic growth for 2021, economists have at least two ways to view it: as a year of robust improvement over 2020, or one that’s still far behind the pre-COVID economy.

The Hawaii Department of Business, Economic Development and Tourism is choosing the former. In a news release accompanying its economic report for the first quarter of 2021, published on Monday, DBEDT predicts Hawaii’s economy will grow at a rate of 2.7% this year, compared with last year.

That’s normally a healthy increase. The problem: 2020 was such a bad year that a 2.7% increase in gross domestic product, which is a measure of all the goods and services produced, doesn’t come close to getting the state out of a hole that saw an estimated 7.5% decline in 2020 compared with 2019.

Scores gather with no masks at ‘Walls’ or the Kapahulu Groin on a sunday during COVID-19 pandemic. October 25, 2020
The return of travelers starting in October, when this photograph was taken in Waikiki, has meant a flow of revenue into the economy without a feared surge in COVID-19 cases. Cory Lum/Civil Beat

“That’s still down roughly 5% from what it was in 2019,” says Carl Bonham, executive director of the University of Hawaii Economic Research Organization. UHERO has its own GDP forecast coming out soon, and it’s not too different from DBEDT’s, according to Bonham.

But Bonham acknowledges using 2020 as a benchmark for year-over-year comparisons doesn’t make much sense. “Last year is the lost year,” he said.

Comparing data year over year might be standard in normal times, but not in the age of COVID-19, Bonham said.

“At our last data meeting we talked about (how) we need to change that,” Bonham said, referring to UHERO’s data team. “We need to change it to year-over-pre-pandemic.”

He added: “There won’t be any talk about year-over-year change. It will be pre-pandemic.”

Despite the encouraging report, DBEDT also acknowledged that “it will take a few years to fully recover to pre-pandemic levels and businesses will continue to face challenges.”

Generally considered a measure of the size of the economy, Hawaii’s GDP in 2019 was approximately $97.3 billion, according to UHERO. Based on that, the 7.5% decline that DBEDT estimates for 2020 would mean Hawaii’s economy produced about $7.3 billion less in goods and services in 2020 compared with the year before.

Still, DBEDT’s report shows Hawaii is starting to come out of a hole. Federal stimulus money brought $10.6 billion to the state in 2020, DBEDT noted. And the state is expected to get another $7 billion this year, DBEDT said.

In addition, tourism is starting to come back, thanks to a program, known as Safe Travels, that lets travelers avoid a 10-day quarantine by showing a recent negative COVID-19 test.

The travel program brought in 496,186 visitors in the fourth quarter of 2020, about one-fifth the number in the same period in 2019, DBEDT reported. That compared to the months before Safe Travels, when visitor arrivals were about 1.8% of the same period a year earlier.

This year, the trend has gotten better: in February, visitor arrivals bounced back to 30% of February 2019 levels.

DBEDT’s director, Mike McCartney, expressed optimism.

“It has been one year since the onset of COVID-19 and it’s been a tough and challenging time for all of us,” he said. “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.”

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