Planning Board: Puerto Rico Economy to Drop 2% in Fiscal 2017
SAN JUAN — The Puerto Rico Planning Board presented its projections for fiscal years 2016 and 2017 on Friday, painting a less than rosy picture for the commonwealth’s economy in the years ahead.
When it comes to fiscal 2016, which ends June 30, the island’s gross national product (GNP) is slated to shrink by 1.2%; earlier estimates had the contraction pegged at 1.3%. Meanwhile, for fiscal 2017, Puerto Rico’s GNP is expected to drop by 2%, Planning Board President Luis García Pelatti said.
The projections take into consideration various factors, among them the global and U.S. economies, oil prices, product exports on an adjusted basis, visitors’ expenditures, investment in construction, and federal transfers to individuals, among other parameters, García Pelatti noted.
Fiscal 2017’s projected drop represents a statistical baseline, with an alternative pessimistic scenario bringing the contraction further to 3%, while an optimistic scenario would lessen the blow with the economy shrinking by 1%, explained Luis Benítez, who heads the Planning Board’s Economic & Social Planning Program; however, no scenarios contemplate a flat curve, much less any kind of economic growth.
The economic forecast would mark the fifth straight year in which Puerto Rico’s economy has contracted since a slight economic uptick of 0.5% was registered in 2012.
The commonwealth—which is battling a $70 billion debt load and looming default payments on its bond obligations, coupled with a heavy outflow of residents leaving the island and a rapidly eroding tax base—has been going through a recession since 2006, with the local economy having shrunk by more than 15% since then.
Of note is that the main economic metric used by the Planning Board and the rest of the Puerto Rico government, the GNP, has become almost obsolete in the international community since the United Nations made the switch from GNP to gross domestic product (GDP) in 1993 as a standard to measure a nation’s economy.
While GDP takes into account economic activity from both native and foreign individuals and entities in a particular jurisdiction, GNP tracks the economic activity only from native individuals and entities both within a jurisdiction and abroad.