Hawai'i's economy will grow at a slower rate this year and in 2009 than was previously thought, according to the latest economic forecast issued yesterday by the state Department of Business, Economic Development and Tourism.

DBEDT projected that the state's gross domestic product will grow by 2.3 percent this year after adjustment for inflation, compared with the 2.5 percent that was forecast in February and the 2.8 percent predicted late last year.

In 2009, the state's economy is projected to grow by an inflation-adjusted 2.2 percent, down 0.3 of a percentage point from the previous forecast. The revised forecast is in line with those of other economists who have projected a slowing of the state's economy this year and next.

The state says the slump is partially caused by an expected drop in visitor arrivals following the shutdown of Aloha and ATA airlines, as well as the departure of two NCL America cruise ships from the Hawai'i market.

Visitor arrivals this year are expected to decline 3 percent, compared with the 1.4 percent decrease in the previous forecast. DBEDT also sees no growth in visitor arrivals in 2009.

Visitor spending is projected to increase by just 0.5 percent this year, compared with the 1.5 percent increase projected earlier this year. The state expects spending to rise by 3.6 percent in 2009, lower than the previous projection of 4.2 percent.

The state also is forecasting that residents will have less money to spend in 2008. The revised forecast calls for personal income, adjusted for inflation, to increase 0.8 percent this year, down from the 1.6 in the previous forecast.

Income also is projected to grow 1.1 percent in 2009, down 0.8 of a percentage point from the earlier forecast.

Honolulu's rate of inflation is projected to rise to 4.2 percent, up from the 4.0 percent in the earlier forecast.

Despite the less-than-sparkling forecast, DBEDT director Ted Liu maintained a positive outlook. "We believe that our economy will adjust to recent economic events and that our fundamental economic foundation remains strong," Liu said.