After I cut out the yellow fleece and sewn up the seams, I had her try the jacket on. It was quite fitted on her and she actually had trouble putting it on herself. I forgot that there was loft with this fleece and she was suppose to wear long sleeves shirts under this jacket.
I didn`t want to just give up on the fabric and throw the whole thing into the trash. I dug deep into my stash and found a wine colour microfleece. I cut strips of about 3cm width out of this wine fleece and sewed the whole strip from the wrist of the jacket all the way down to the hem to enlarge the armhole and the side seams:
I also used this same fleece to bind the edges of the entire jacket to make the enlargement look 'intentional'. I used a thrifted zipper as enclosure. I'm happy I saved this jacket and now it's a unique gift for my daughter!