Outlook brightens for Hawaii economy

Hawaii’s economy should receive a beneficial one-two punch this summer from vaccinated tourists, vaccinated residents and federal aid.

The prospect of more vaccinated tourists visiting the state, perhaps under a corona­virus vaccine passport program, could mean Hawaii visitor arrivals will bounce back to around half their record 2019 level, or more, by summer and continue rising in the second half of this year.

At the same time, a new round of federal aid for businesses and individuals could reduce the size of a previously expected slump in statewide income by half or more this year.

These two rough estimations were made Monday by the executive director of the University of Hawaii Economic Research Organization, Carl Bonham, who delivered a presentation to a special state House committee and spoke to the media afterward.

“There’s good reason to be optimistic about the overall economy over the next year as we get these vaccines rolled out,” Bonham said. “We’re going to have many more people vaccinated than we are right now. And that’s going to allow some degree of improvement in our ability to get about and to conduct business, and it’s going to have some degree of improvement in tourism spending. And we’re going to see another wave of money from (Washington) D.C. That’s pretty clear.”

Peter Ho, Bank of Hawaii’s chief executive and a member along with Bonham of the House Select Committee on COVID-19 Economic and Financial Preparedness, said a $284 billion round of forgivable federal Paycheck Protection Program loans that became available last month should serve about as many Hawaii businesses as a prior round last year but with a lower amount of money.

About 26,000 PPP loans were made last year to Hawaii businesses, which received about $2.5 billion.

On top of new PPP loans, many local residents could receive $1,400 stimulus checks proposed by President Joe Biden. The president also has proposed increasing an existing $300 federal weekly bonus on state unemployment benefits to $400 and extending the program’s March expiration to September as part of a $1.9 trillion economic rescue plan.

“This is really important for Hawaii because we are somewhat out of sync relative to the broader national economy, as in we’re lagging,” Ho said. “And so I think that the fact that there’s going to be some form of additional stimulus (coming) in is a huge positive for our economy as we try to re-synchronize with the country as a whole.”

Added Bonham, “This is our best shot at really getting re-synchronized. It’s very important in terms of getting Hawaii back on track.”

There is, of course, some uncertainty as to when a rescue plan might be passed by Congress and whether it changes through negotiations between Democrats and Republicans.

Another uncertainty is when Hawaii policies on air travel and gathering might be modified to accommodate growing numbers of people who are vaccinated.

Mark Mugiishi, CEO of local health insurer HMSA and a member of the special House committee, said state leaders should prepare to quickly amend the Safe Travels program and restrictions on gathering based on anticipated scientific study results showing whether COVID-19 vaccinations affect virus transmission.

“We should be talking about it now so we’re ready when the time is right,” he said.

Mugiishi said he can envision vaccine passports that allow people to visit and gather, affecting not only travel, but also restrictions on businesses, recreation, sporting events and other settings.

If such a vaccine passport program is created, Bonham expects the greatest near-term benefit on tourism would be from mainland travelers, with a lag from international visitors, who typically make up one-third of Hawaii tourism arrivals.

That’s because countries representing major Hawaii tourism markets are behind the U.S. in vaccinating residents.

For instance, Japan has yet to begin, while Canada has administered at least one shot to less than 2% of its population, compared with about 10% in the U.S., according to Bonham. South Korea is also moving more slowly than the U.S., and Australia is starting this month.

“Most of the countries that we rely on for our international visitors are well behind the U.S., and that will affect the path of recovery in Hawaii,” Bonham said.

A detailed Hawaii economic forecast update from UHERO is expected to be ready in March with specific figures on visitor arrivals, unemployment, income, gross domestic product and other items.