Puerto Rico’s economic activity index slipped 0.7% in June, the first year-over-year decline in 12 months, as the economic boost from federal hurricane recovery aid receded.
The Economic Bank for Puerto Rico on Wednesday said economic activity in June slipped 0.3% from May, declining at an annualized pace of 3.6%. The bank said the drop is in comparison to a month, June 2018, when Puerto Rico still didn’t have all its energy system restored after the 2017 hurricanes.
Over the last five years the index has dropped 5.4%. It has fallen about 24% from its peak in late 2004, before a decade-long recession sent the territory toward its historic municipal bankruptcy.
June’s decline happened before a torrent of controversies concerning the central government, which has culminated in three people holding the governorship within the last week. The controversy started to simmer in late June when then Treasury Secretary Raúl Maldonado Gautier claimed his department had a bevy of corrupt officials.
“June 2019 is the first of a string of year-on-year negative growth [measures] in the Economic Activity Index,” said Advantage Business Consulting President Vicente Feliciano. “After the initial recovery from Hurricane Maria, powered by [Federal Emergency Management Agency] emergency work and private insurance payments, the Puerto Rico economy is running out of steam.”
Heidi Calero, president of H. Calero Consulting Group, Inc., said in an email, “Reconstruction efforts are SLOWWWW since federal funds have not been disbursed as quickly or in the amounts the Puerto Rico government had announced.”
Feliciano and Gustavo Veléz, chairman of Inteligencia Económica agreed that slow disbursement of federal reconstruction funds was a factor. “The initial insurance payments are done and what remains will trickle in, mainly as a result of civil litigation. So structural reform has been enacted but more needs to be done, particularly in the area of energy,” Feliciano said.
Veléz said, “The delay in the [Community Development Block Grant] funds ($8 billion), will likely affect economic performance for the rest of the year. I will not be surprised if the economy returns to negative ground soon.”
Calero said, “The most recent events regarding who would finally take the helm of the office of the governor will not end the risk of uncertainty any time soon.”
On a month-to-month basis two of the components for the index were up and two were down. Electric power generation increased by 3.7% and cement sales grew by 2.9%. From month-to-month non-farm payroll employment declined 1% and gasoline consumption shrank 1.9%.
