Puerto Rico revenue, spending drop less than expected

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Puerto Rico’s government revenue and expenditures for the year through Oct. 27 have fallen less than some analysts expected after Hurricane Maria.

From July 1 through Oct. 27 commonwealth government revenues, excluding the portion of federal aid that exceeded budget, dropped 14.4%, Puerto Rico’s Fiscal Agency and Financial Advisory Authority reported Thursday. During the same period expenditures were also down 13.7%. Hurricane Maria hit the island on Sept. 20.

“I would have expected worse,” said Sean Burgess, Cumberland Advisors Puerto Rico portfolio manager.

Federal aid may be propping up the economy and thus government revenues and allowing the government to spend less of its money, he said.

The decline in revenues was expected, said Ted Hampton, Moody’s Investors Service senior credit officer. Hurricane Maria’s impact on electricity and other infrastructure means “there are plenty of reasons to worry about Puerto Rico’s ability to function.” There may be more fiscal damage apparent in November and December.

Hampton said Moody’s currently expects revenues to lag for the next 12 to 13 months behind what they would have been without Maria. After that the natural economic recovery from the hurricane may lead to a period of higher than expected revenues.

Over the long term the level of federal financial assistance will be “crucial.” This will determine the island’s ability to pay its existing bonds, said Hampton, who is Moody’s chief Puerto Rico analyst.

“The financial pressures will remain acute,” Hampton said.

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