Virgin Islands warns of coronavirus’ economic impact

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The U.S. Virgin Islands’ Public Finance Authority warned Tuesday of the impact of the coronavirus on its economy and it is dire.

In a posting to the Municipal Securities Rulemanking Board's EMMA website late on Tuesday morning, the authority said that COVID-19 “poses a significant risk to the U.S. Virgin Islands economy.”

A view of St. Thomas, U.S. Virgin Islands.

“The Virgin Islands is particularly impacted due to its reliance on cruise ship and airline traffic to support its tourism-based economy,” the authority stated. “Economic activity has slowed sharply in recent weeks and this trend is expected to continue to slow the spread of the pandemic.”

“The extent to which the coronavirus may impact business activity or investment returns will depend on future developments, which are highly uncertain and cannot be predicted at this time,” it continued. “This includes new information that may emerge concerning the severity of the coronavirus and the actions required to contain the coronavirus or treat its impact.”

In response to the authority’s post, Moody’s Investors Service Senior Vice President Ken Kurtz said, “The U.S. Virgin Islands’ announcement about the slowdown in tourism and the economy as a result of the pandemic highlights the significant economic and fiscal weaknesses captured in the territory’s Caa3 issuer rating. If the downturn in tourism is protracted or the recovery is slow, the government may face renewed liquidity challenges and difficulties in funding its outsized long-term obligations including its debt and pension liabilities.”

Virgin Islands Senator Myron Jackson said, “We are awaiting federal relief to the Virgin Islands and its implementation will determine how quickly we are able to stop some of the bleeding to our small business community, the hospitality sector, and service industry. Within the next two weeks, with ongoing assessment, we expect to have a clearer picture of the economic implications to the fiscal health of the Virgin Islands as we battle this pandemic.

“The Legislature of the Virgin Islands approved financial measures that were sent last week to the governor in response to this global crisis,” Jackson continued. “We will continue to do what it takes to keep our economy afloat within our means.”

Regarding the post, Municipal Market Analytics Managing Director Lisa Washburn said, “For a challenged credit, you’d definitely like to have more information. Other [EMMA] filings, particularly in the hospital and transportation sectors, have provided detailed information on how the virus has impacted usage and/or revenue streams and outlined the liquid resources available to the issuer to address the declines.”

As of Sept. 30, 2017 the U.S. Virgin Islands government had $2 billion in debt. Of this, $1,201 million was matching fund bonds and $722 million was gross receipts bonds. In September Moody’s predicted that the island’s pension system would run out of money in 2023.

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