Sunday, February 25, 2018

N.Y. Fed: Repercussions of Hurricane Maria difficult to measure

By on January 22, 2018

SAN JUAN – Puerto Rico’s historical path was changed Sept. 20, and much has been said about the magnitude of Hurricane Maria’s repercussions since then. Nonetheless, this climatic event has caused devastation on many fronts, diminishing quality of life and increasing human suffering, both physically and mentally. According to a blog by researchers from the Federal Reserve Bank of New York, the economic toll cannot easily be measured.

In the aftermath of this historic event, the massive damage wrought upon the island’s infrastructure has even made it difficult to determine loss of life. The islandwide loss of electric power, still being experienced by nearly one-third of the population, has been unprecedented in modern U.S. history. A widespread lack of drinking water and access to medicine and medical personnel, as well as downed telecommunications, are but a few of the additional obstacles that arose post-Maria.

(NASA/NOAA)

With the hurricane, however, Puerto Rico’s need for financial resources has only exacerbated the island’s economic crisis, which at the individual level has been magnified through the loss of jobs and access to cash in an economy made instantly devoid, albeit temporarily, of modern conveniences.

So, for how long will the economic effects of this calamity be felt? Puerto Rico’s ailing economy and indebtedness were made exponentially worse through lost capital, diminished economic output and a displaced, or unavailable, labor force. It has been estimated that more than 15% of the population will have relocated stateside by the end of the recovery period. Estimates of the resulting economic loss range from $16 billion to $95 billion, depending on the source.

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The most severe and damaging factor is probably the lack of electric power, which ranged from 98% of the island after Maria left to about 30% of utility customers who are still in the dark today.

Add to that a general loss in quality of life that has ramped up outmigration; the enormous impact on infrastructure, from transportation to banking; healthcare and political disruptions; and a lull in Treasury revenue due to decreased worker take-home pay and no digital register of withheld sales taxes are among the myriad reasons for Puerto Rico’s uncertain socioeconomic and political future.

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In its Liberty Street Economics blog, the New York Fed, responsible for the Federal Reserve System’s second district, which includes Puerto Rico, recently posted a commentary entitled, “Beginning to Gauge Maria’s Effect on Puerto Rico’s Economy.”

Its writers– research officer Jason Bram and senior analyst Lauren Thomas, from the New York Fed’s Research & Statistics Group–said the island’s future is difficult to forecast compared with other places that have had natural disasters. Highlighting the time it has taken to repair the island’s electrical grid, its fiscal situation before two hurricanes in September  and the many factors that comprise its economy, the authors make a case about the time and incoming data needed to “predict Puerto Rico’s post-hurricane prospects.”

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Historically, they said, recovery-related construction can offset lower employment after a hurricane, but the damage to agriculture may not recover quickly, pointing to an article that cites the island’s agriculture secretary saying 80% of crops were estimated to have been wiped out, while poultry production loss was pegged at 90%.

However, the authors contend the “worst-case scenario for the island’s economy”– people “emigrating, businesses closing, tax base shrinking, cuts in services and tax hikes leading to still more outmigration”–“appears to have been averted—at least thus far.”

Read the New York Fed’s post here.

 

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