Puerto Rico Manufacturers report forecasts 2.6%-5.5% GNP growth for fiscal 2018
SAN JUAN – The Puerto Rico Manufacturers Association’s (PRMA) October 2017 issue of its Econews publication outlines two possible short- and medium-term forecasts for the island after the devastating impact of Hurricane Maria last month.
The rosy forecasts project a growth in gross national product (GNP) over the next two fiscal years. Under Scenario I, Puerto Rico’s GNP would increase by 2.6% in fiscal year 2018 and 1.7% in fiscal 2019.
Under Scenario II, the GNP would rise by a whopping 5.5% in fiscal 2018 and 3.7% in fiscal 2019.
According to a copy of the newsletter obtained by Caribbean Business, local firm Estudios Técnicos (ET) developed two scenarios to estimate the impact of federal assistance and insurance claims disbursements for the island: Scenario I assumed federal aid of $1 billion and Scenario II of $5 billion.
Various assumptions were also used: inflation increases to 4% and insurance disbursements total $5 billion, among other factors.
“Given past experiences with hurricanes in Puerto Rico, like Georges [in 1998], it’s no surprise that under both scenarios an increase in real GNP is expected,” citing the case of Louisiana after Hurricane Katrina in 2005, the newsletter states.
“The increase in spending fueled by insurance disbursements and federal aid leads to a boom in consumption and investment,” the publication adds, “But this expansion in economic activity is only temporary; after 2019 Puerto Rico will likely return to a declining trend in GNP growth. Other socioeconomic indicators, like migration, will likely continue to increase, reducing the island’s capacity to bounce back.”
As caveats, the PRMA newsletter acknowledges the economic analysis did not take into account several factors, such as “the additional costs of rebuilding, substituting or improving the current structures, both public and private.” At the same time, neither the loss in value of companies nor lost production was considered, “as these are highly volatile and their assessment speculative.”
Still, some lost productivity could be recovered. “In the case of tourism, for example, it is likely that room nights lost will not be recovered because it will take hotels months to reopen,” the newsletter reads.
Widespread reports from local, national and international news outlets highlight the millions of dollars lost in production in Puerto Rico’s agricultural, manufacturing, tourism, retail, advertising and restaurant and other service sectors. With 75% of the island still without electricity service, many businesses of all sizes are still closed and have been forced to lay off their workers. As a result, some residents have opted to leave the island and move stateside, while those remaining have been forced to cut back on living expenses.
The economic projections seem to belie the dozens of media reports on the extent of the damages wrought on Puerto Rico by Maria and the long and challenging road to recovery. As reported by Caribbean Business, there have been wide variations on initial damage estimates (physical damages and lost economic output), from a high of $95 billion by Moody’s Analytics to a low of $16 billion by Estudios Técnicos. Enki Research put the figure at $30 billion, while AIR Worldwide’s estimate is as high as $85 billion.