Puerto Rico’s population declined less than the Oversight Board projected in fiscal year 2018, underscoring the expectation that the blueprint for economic recovery and repayment of bonds may be subject to revision.
The Oct. 23 Oversight Board-approved fiscal plan said the population decline would be about 20% larger than it actually was, based on the U.S. census report released Wednesday.
The discrepancy was one of a number of missed forecasts in the fiscal plan, according to Estudios Técnicos Chairman José Villamil, who said the board's estimates of gross national product and federal assistance were also in error.
“The fiscal plan they have in place will have to be redone because all the projections are wrong,” Villamil said.
A spokesperson said the Oversight Board "will review all new information it receives in detail and take it into consideration when the fiscal plan is next updated."
The territory's population declined by about 130,000 people to 3,195,153, as of July 1, 2018, according to the U.S. Census. The board had projected 3.165 million for the date.
The board's fiscal plan had used an earlier and different Census population estimate for the July 1, 2017 to predict a 5.1% decline in population between the two dates. That would have been a 23.5% greater estimate of the decline than the latest estimate of the decline.
The board spokesperson said that its population estimate for July 1, 2018 was only slightly lower than the Census estimate and that the latter may be revised later to more fully account for the hurricane's impact.
The board uses its population projections to help it project economic activity and Commonwealth government revenues in the fiscal plan. And it uses government revenues as a guide for how much money will be available to pay bondholders.
Effectively, the board’s population projections affect how much money it will offer in the various Puerto Rico bond bankruptcies and negotiations outside of the bankruptcies.
Most of the population decline was due to the impact of Hurricanes Irma and Maria in September 2017, which led to increased levels of emigration, said Puerto Rico-based economist Mario Marazzi Santiago.
Additionally, according to the fiscal plan Puerto Rico’s median age has been rapidly advancing. Along with a declining number of births, this led to population figures being in “natural decline” by 2016. In addition to this phenomenon, there has been net emigration from the island since at least 2010. As of July 1 population was down 14% from eight years earlier.
Since 2000, Puerto Rico’s population peaked in 2004 at 3.83 million.
The board projects that Puerto Rico’s population will decline to about 2.9 million people in fiscal year 2025. Villamil, of Estudios Técnicos, said his firm was projecting a total slightly over 3.0 million.
Shortly after the hurricanes Villamil’s firm projected that there would be 3,195,118 residents as of July 1, just 35 people short of the actual number.
Villamil said that the board’s projection for population declines was just one of several inaccurate board projections. The Oct. 23 plan estimated that Puerto Rico’s economy real gross national product contracted by 8% in fiscal year 2018. Right after the hurricane, Estudios Técnicos estimated that GNP would increase by 0% to 2%.
Villamil said economic data now suggest that real GNP increased by 1%-to-1.5% in fiscal year 2018.
A board spokesperson said that Puerto Rico GNP is usually close to the Economic Activity Index figure put out by Puerto Rico's Fiscal Agency and Financial Advisory Authority. The index was down 6.8% in fiscal year 2018, she said.
"The board has not seen any indication that there was positive growth in 2018 as a whole," the board spokesperson said.
Villamil said he thought the board’s fiscal plan is too optimistic about the amount of federal aid the island will get.
The U.S. Census itself will release a new estimate of the July 1, 2018 population in 2019 and yet another in 2020, Marazzi Santiago said.
