Puerto Rico economists have differing views about Puerto Rico’s economic condition in the coming year.
Banco Popular Chief Financial Officer Carlos Vazquez acknowledged challenges but was generally optimistic. “The pace of the recovery has slowed as the beneficial effect of the CARES Act get extinguished and the second wave of COVID has led to additional activity restrictions and some increased uncertainty.
“We are cautiously optimistic that the positive effect of the start of vaccinations, the stimulus from the just-passed federal legislation and the continued flow of hurricane Maria-related assistance will result in a positive economic environment for 2021,” he said. Banco Popular is the biggest bank in Puerto Rico.
Puerto Rico economist Sergio Marxuach was more negative. “The economy continues to be affected by the COVID-19 epidemic. The government has implemented a series of measures to control the contagion [that] have dialed back economic activity. Many small and medium enterprises are operating at a reduced capacity. In general, low-skill, low-wage workers have borne the brunt of the downturn, mostly in the retail, tourism, entertainment and hospitality sectors.
“The official unemployment rate is misleading,” he said. “If we considered people working part-time but who want a full-time job, the people employed but not working [like some government workers], and those who have given up looking for a job, the unemployment rate would be well north of 20%.
“In sum, the employment data point to a weak economy, with low job creation, increasing poverty, and a relatively high rate of business closures,"Marxuach continued. “This on top of already stagnant economic activity prior to the pandemic. The road forward will be a hard slog, as we will spend the first six months of 2021 getting vaccinated against COVID-19 and negotiating with bondholders, while hurricane reconstruction work remains sluggish, and the population continues to decrease, due to lower fertility rates and migration to the mainland.”
Heidie Calero, president of H. Calero Consulting Group in Puerto Rico, said, “Governor-elect [Pedro] Pierluisi faces many challenges at the start of 2021 and none are more important than controlling COVID-19; restoring economic growth; efficient use of federal rescue and COVID relief funds; choosing a competent infrastructure plan, badly needed in electricity and roads, but above all outlining a vision of where Puerto Rico should be in the next five years.
“No small task ahead, particularly since incompetence in execution has been difficult to shake both in the private and public sectors over the past decades,” she said. “However, there is always hope for a New Year!”
In the Puerto Rico Oversight Board’s Dec. 8 response to bondholders, it said the commonwealth’s economy was in worse shape than bondholders claimed. The board said from March to November non-farm employment had declined 4.3% in the United States but 7.3% in Puerto Rico.
The board said the economy is likely to return to a long-term decline soon.
On Friday, the U.S. Bureau of Labor Statistics released a survey on Puerto Rico jobs, which showed total employment in November declined to 949,300 from 954,200 in October, the first drop since May.
The November employment total was 2.6% below the figure for November 2019 and 4.4% below the number for November 2015.
The bureau also released its establishment survey figures. The survey of non-farm employers showed a decline in employment to 820,100 in November from 820,600 in October.
The survey showed a 7% decline in the past 12 months and an 8.5% decline in the past five years.
The same survey showed private-sector employment was down 9.1% in the past 12 months and 7.4% in the past five years.
All these employment statistics are seasonally adjusted.
Also on Friday, the Economic Development Bank for Puerto Rico announced its October economic activity index for the island was up 0.4% from September but down 6.4% from October 2019.
The latest retail sales figure shows August sales up 11.5% from a year earlier. However, retail sales from January through August were down 8.3% from the same period a year earlier. The August increase may have been due to the opening of the retail sector after the spring shutdowns and the distribution of federal COVID-19 aid on the island.
