OLYMPIA — Washington’s projected $8.8-billion budget shortfall over the next three years has been slashed in half, as economic activity rebounded since the onset of the COVID-19 pandemic and the early statewide restrictions to curb the new coronavirus.

The state’s projected shortfall is now $4.2 billion through 2023, according to a new estimate by the Washington Economic and Revenue Forecast Council.

Released Wednesday, the new projections cite higher-than-expected tax collections, help from federal stimulus dollars and other improving economic indicators.

But lawmakers will still have to wrestle with difficult decisions when they return in January for their regularly scheduled legislative session, or if they return earlier for a special session.

Wednesday’s forecast now shows a shortfall of the current, two-year state operating budget of approximately $2.3 billion — not counting the roughly $3 billion in budget reserves.

That projected shortfall is down from the $4.5-billion budget hole that forecasters had predicted in June.

Meanwhile, the new forecast projects a $1.9 billion shortfall for the 2021-23 budget cycle — a budget for which lawmakers will draft when the return in January. That’s down from the $4.3 billion shortfall that had been predicted in June.

In a statement, Sen. Christine Rolfes, D-Bainbridge Island, said the forecast indicated that, “Washington’s diverse economy is showing signs of resilience.”

“While we will still face many challenges ahead, there are some extremely positive signals for our state’s financial picture in this forecast and it represents an enormous step in shoring up our state’s projected budget deficit,” said Rolfes, the chief Senate Democratic budget writer.

Republicans — along with some Democrats — meanwhile have been frustrated by the lack of a special legislative session since the onset of the pandemic in March.

The statewide restrictions put in place then to stifle the spread of the virus have since morphed into Gov. Jay Inslee’s four-phase coronavirus recovery plan. That blueprint allows counties to get permission from state health officials to loosen restrictions based on a variety of factors.

Inslee and health officials froze counties from opening up more broadly in late summer, after a spike in cases led Washington to new peaks in the pandemic. The governor’s office recently has continued to ease a handful of restrictions in certain industry sectors, like agritourism — for hayrides and pumpkin patches — and event venues such as conference centers.

In a statement Wednesday, Sen. John Braun, R-Centralia, said a special session was still necessary.

“While the state’s economy is in a better place now than it was during the second quarter, that’s little consolation for the employers who are still stifled by a restart plan that occasionally lurches forward but generally seems to be in a holding pattern,” said Braun in a statement.

“We should be meeting in a special session right now, to reprioritize spending and put the budget on a better course for the nine months left in the biennium,” added Braun, the chief GOP Senate budget writer.