Puerto Rico Compass ©

Q2 2015: Casualties of PR’s Economic Recession

A snapshot in Q2-2015

The six quarterly indices for the Puerto Rico economy have one thing in common: they are all in negative territory. The Construction index in particular continues to pull down economic recovery in the near future. Other indicators reflect consumer’s lack of confidence in a labor market that continues struggling, a suspect deflationary environment awaiting the impact of a higher SUT tax effective July 1, 2015, and a financial sector that continues downsizing. Thus the island is “not poised for a growth spurt once the fiscal cliff and payment of public debt are normalized.” Some moves in the leading index may be promising, particularly as oil prices continue to tumble and interest rates remain low. The private sector jobs have not been able to neutralize the reduction and attrition in government jobs. Housing sales are flat and do not spur new construction in the near term. Compared to the US and some of its regions, Puerto Rico’s economy continues to struggle and international financial markets are not inclined to lend to the once frequent and desirable municipal bond issuer.

Puerto Rico Economic Pulse ©

June 2015: Puerto Rico’s Troubled Decade Ahead

Despite coming adjustments, opportunities will emerge

The public discussion surrounding the government’s attempt to overhaul PR’s tax system coupled with fresh indications that some agencies are on the brink of insolvency is quickly shifting the economic prospects for the next decade. Regrettably, the current situation risks intensifying the ongoing migration wave which, were it to materialize, could lead to a long-lasting plateau. As it stands, population and public finances are the economy’s two most fundamental issues. To grasp this, we take a look at the unfolding long-term scenarios within the current public policy context. Next month’s issue of Pulse will follow this up by examining an alternative scenario, where public policy undergoes a significant turnaround starting in 2017. Whatever the specific outcome nonetheless, one thing is clear: economic activity will not recover without first correcting its misaligned fundamentals.