The delay of hurricane relief funds for Puerto Rico pulled down the island’s economy for the fourth month in a row, returning the U.S. territory to the declining trend of the fiscal crisis.
The island’s Economic Activity Index (EAI) declined 0.7% in December, although it increased 16.1% over the year-ago month. The index stands at 119.5, says the Economic Development Bank of Puerto Rico (EDB).
The month-to-month decline was a result of the lack of relief money that was supposed to arrive in Puerto Rico from the U.S. government to repair damage from back-to-back hurricanes Irma and María, economists said. The hold up has exposed the depressed economy that the island has been having in the last 10 years.
The EAI is composed of four indicators: gasoline consumption, electric power generation, non-farm payroll employment and cement sales. Compared with November’s number, gasoline consumption fell by 2.6%; electric generation had a slight slip of 0.1%; and non-farm payroll was also lower by 0.1%. Meanwhile, cement sales, which provide a picture of construction activity, registered an increase of 0.1%.
While published data show declining numbers in December, the Puerto Rican government celebrated the year-over-year increase. “The EDB-EAI, reached 119.5 in December 2018, a 16.1% growth compared to December 2017, the fourth year-over-year increment after 69 consecutive months of negative growth,” said the Economic Development Bank of Puerto Rico.
Economists say the numbers should be analyzed carefully due to the impact hurricanes Irma and María on Puerto Rico. The storms hit the U.S. territory within two weeks of each other in September 2017.
“Anything compared to the last months of 2017 is a bad comparison,” said Alba Brugueras, president of the Puerto Rican Association of Economists.
Damage from the storm caused the electric grid to collapse, destroyed houses and businesses and forced people to stop working. Gasoline consumption rose due to high usage of generators. All of these factors pulled down October’s 2017 EAI to 99.0. A number that low hadn’t been registered since 1986, when the economy was recovering from the Recession of 1982.
In November 2017, the EAI began to increase as recovery funds from the Federal Emergency Management Agency began to arrive. Also, the numbers began stabilizing as companies began to operate again. Even though businesses were getting back to work, Puerto Rico was still feeling the effects of the fiscal crisis. The economy is way down by a $74 billion debt.
Hopes to boost the economy are placed in the hurricane relief funds assigned by the U.S. government. What Puerto Ricans didn’t expect was that the release of these funds were going to be delayed due to factors like, the partial shutdown of the federal government in December 2018 and the possibility of diverting disaster relief money to pay for a border wall with Mexico.
As of today, only 19% of the $20 billion assigned by the U.S. Department of Housing and Urban Development has been allocated to the island. Economists expect that once reimbursements start to become fully available, the EAI will stop declining. “It’s an extra dollar we didn’t have before; it can’t decline,” said economist Jose Caraballo Cueto.