Puerto Rico Economic Outlook 2018: The Climb Begins
Editor’s note: The following article originally appeared in the Feb. 8-14 print edition of Caribbean Business.
In September 2017, Hurricane Maria made landfall on Puerto Rico with the storm’s eye passing directly over the island. The effect was devastating, leaving a total of $90 billion in damages and taking its toll not only on the human, social and psychological fabric of Puerto Rico but also on its fragile economy, labor market dynamics and individual businesses.
Grim outlook
What’s more, Puerto Rico’s economic outlook faces a bleak prognosis. The latest indicators suggest the decline in real gross national product (GNP) for 2017-18 could be close to double digits and then should improve in subsequent years as federal funds come in, some $21 billion in insurance claims are paid and restoration moves into full force. The government’s most recent revised fiscal plan painted a bleak picture of Puerto Rico struggling to jumpstart an ailing economy that was wounded further still after suffering one of its worst natural disasters in a century. Puerto Rico has requested $94.4 billion in Federal Disaster Relief Assistance, but its projections assume the island will get $35.3 billion.
While the previous 10-year fiscal plan, issued in March of last year, set aside some $3.9 billion to pay the island’s creditors across five years, or an average of about $787 million annually, the new plan, revised after the hurricane, contains no funds to pay creditors. Now, Gov. Ricardo Rosselló is saying the government will wait for the bankruptcy proceedings enabled by the Puerto Rico Oversight, Management & Economic Stability Act (Promesa) to be completed to determine debt repayment. A $3.7 billion surplus in the previous plan for the first five years, will now be a $3.4 billion gap, even after the elimination of funding to municipalities, rightsizing the government and enforcing tax laws.
Real GNP, inflation, population, revenues
The real GNP is expected to shrink by 11.2 percent this year and then grow by 7.6 percent in fiscal 2019, dropping to 2.4 percent growth in FY20 and grow in subsequent years fueled by the $35 billion in federal disaster support. The nominal GNP, which is calculated at current price levels, is estimated to fall sharply in FY18, by minus-9.3% because of the hurricanes, only to grow in FY19 by 9.3 percent and 2.4 percent in FY20.
In addition to disaster relief assistance, Puerto Rico requires external liquidity support to finance the gap until fiscal measures are fully implemented, according to fiscal plan numbers.
The plan states the hurricanes will create a spike in inflation of 2 percent in FY19, with subsequent average increases of about 1 percent over the next five years, until FY22.
A 19.4 percent cumulative decline in population is expected over the next five years. Lyman Stone, an adviser for consulting firm Demographic Intelligence, who was invited Nov. 16 to a listening session of the Financial Oversight & Management Board (FOMB), said at the time, the island’s population would shrink by 587,943 in the five years after Maria.
Government revenues are also slated to decline 18 percent in FY18 before increasing 9 percent in FY19 and 4 percent in FY20. Taxes collected from individuals and corporations are expected to decline by 19.1 percent and 11.7 percent, respectively, for FY17 and FY18, as a result of hurricanes Maria and Irma, then will grow annually at a nominal GNP growth rate of 4.5 percent through FY22.
–Read the rest of the story here.
Related Posts
Latest News
-
Being Vigilant of the 7 Benchmarks to end 2022
We are just about to end the fourth quarter of...
- Posted November 22, 2022
-
Inflation Heading Down, What Happens Now?
The Four Benchmarks to review that confirm inflation may be...
- Posted November 14, 2022
-
The Six Factors to Expect during the end of 4Q22
We are deep within the fourth quarter we thought it...
- Posted November 10, 2022
-
Puerto Rico Banks Deliver strong earnings, beating most banks
Puerto Rico Banks Transformed their operational model The Puerto Rico...
- Posted November 9, 2022
-
US Congress Discrimination affecting the Puerto Rico’s Healthcare Ecosystem
The market dynamics that changed the Healthcare Ecosystem as we...
- Posted November 8, 2022
-
MCS contributes over $5 million to support member healthcare
The insurer distributed the amount among 409 community pharmacies in...
- Posted November 7, 2022
-
Droguería Betances Launches 60th Anniversary Ad Campaign
Droguería Betances has launched a new advertising campaign, “60 Reasons...
- Posted October 31, 2022
-
Puerto Rico Food Industry Helps Communities in Aftermath of Hurricane Fiona
Over three-quarters of a million dollars in aid to...
- October 24, 2022
-
Medplus Solutions celebrates 10 years Saving Lives
Innovation and continuous growth Expansion of specialized and more...
- May 18, 2022
-
Amazon Web Services Expands Operations in Puerto Rico
Local Office Will Offer Services to other Caribbean Islands...
- April 22, 2022
-
García Padilla: Rubio Is No Friend of Puerto Rico
Governor Says Rubio's Remarks Confirm he Works for 'Vultures'
- February 26, 2016
- 15
You must be logged in to post a comment Login