(Bloomberg) -- Spending by Puerto Rico residents fell by 8.7% from 2012 through 2017, and business investment grew by 2% as the island’s population declined, according to data from the U.S. Commerce Department.
The data support Puerto Rico’s own calculations that its economy has contracted for more than a decade, with residents leaving the island for work on the U.S. mainland.
The department’s Bureau of Economic Analysis has been working with Puerto Rican officials to measure specific areas of its economy and eventually estimate the commonwealth’s gross domestic product. The BEA already calculates GDP for other U.S. territories.
“This is an important step, since it will allow us in the future to obtain more and better data on the behavior of our economy and its response to fiscal and economic development policy initiatives, including the effects of disaster recovery programs,” Puerto Rico Governor Wanda Vazquez said in a statement Tuesday. “It will also allow greater inclusion in federal programs.”
Puerto Rico is still rebuilding after Hurricane Maria destroyed its electrical grid and killed thousands in 2017. The commonwealth’s economy grew by an estimated 4% in the fiscal year that ended June 30 as the island received federal disaster aid and insurance payments, according to Puerto Rico’s federal oversight board.
The BEA anticipates developing the remaining components next year to calculate Puerto Rico’s GDP, according to Thomas Dail, a BEA spokesman.
Inflation-adjusted consumer spending declined by 8.7% from 2012 to 2017, according to BEA data released Tuesday. A drop in wages and rising prices forced residents to pull back on spending in 2014 while Hurricane Maria limited access to goods and services in 2017, according to the report.
The biggest drops were for motor vehicles and non-durable goods such as medicine and clothing, according to the report. Spending on health care and housing also declined.
After decreasing by 1.2% in 2013, inflation-adjusted spending from businesses grew in each of the next four years, including a 0.8% increase in 2017. The growth came mostly from spending on equipment and intellectual property.
Puerto Rico’s economy began to decline after a federal tax break on U.S. companies, such as pharmaceuticals, manufacturing on the island was phased out in 2006.
While the BEA has been working with Puerto Rico since 2011 to modernize its economic data, the devastation from Hurricane Maria in September 2017 showed the need for more modern statistics and for the commonwealth to follow international accounting standards.
Puerto Rico fell into bankruptcy in May 2017 after the commonwealth and its agencies borrowed as much as $74 billion during more than a decade of economic contraction and recurring budget shortfalls.
The BEA is working on improving Puerto Rico’s economic statistics as a federal oversight board is negotiating with creditors to reduce $17.8 billion of debt guaranteed by the commonwealth, the last major restructuring piece of the island’s bankruptcy.
©2019 Bloomberg L.P.
RECOMMENDED FOR YOU
POPULAR