Federal Reserve Bank of New York officials estimated Puerto Rico and the U.S. Virgin Islands have suffered 4 percent and 8 percent jobs losses respectively since hurricanes struck the islands last year and exacerbated already struggling economies.
They suggested during a briefing Thursday that the island economies have improved, but their recoveries could be complicated by several factors, including: how many residents move off the islands, how much external aid they receive and how successful reforms targeting pre-existing fiscal pressures prove to be.
“The hurricanes were overlaid onto already weak economies, and so this has raised concerns about long-term prospects,” said Jason Bram, a research officer. “Despite the devastation and the dire situation before the storms, Puerto Rico’s economy has shown signs of resilience. People have found ways to get around the power outages and so forth. The U.S. Virgin Islands appears to be taking longer to recover, but at least they’ve stabilized.”
Hurricane Maria was the most devastating hurricane to hit Puerto Rico in nearly a century, according to Bram. More than 1,000 deaths were attributed to the storm. Several buildings and roads were damaged as well as 80 percent of the island’s crops, according to the economic briefing.
Maria created “by far,” the worst power outage in U.S. history, Bram said. He estimated 75 percent of the island has since regained power.
About 160,000 more passengers left Puerto Rico between August and November 2017 than seen in recent data, according to Bram. He suggested that about 20,000 to 30,000 of these people were tourists. But Puerto Rico has been losing residents to the mainland as its economy dipped during recent years.
In 2016, the island’s public debt amounted to about 100 percent of its gross national product, and the federal government moved to usher it through a bankruptcy-like process and place it under a fiscal oversight board.
The Virgin Islands’ economy was also struggling before hurricanes Irma and Maria hit, in part due to the closure of a major oil refinery in 2012. Its public debt was about 72 percent of its gross domestic product, and the islands have limited access to debt issued on the market, according to the briefing.
Residents have also left the Virgin Islands, and its power restoration process has been more gradual, Bram said.
Based on job loss estimates, the U.S. Virgin Islands has weathered similar setbacks — losing about 6.2 percent of jobs after Hurricane Marilyn in 1995 and 9.4 percent of jobs in the wake of Hurricane Hugo in 1989, according to the briefing. The metro New Orleans economy suffered what is believed to be a 29.7 percent loss of jobs after Hurricane Katrina in 2005, but Bram said that disaster may not be a good benchmark, given its severity.
“If we were confident that this is going to follow the normal path, we would say, ‘Well, it will probably take about a year to get back,’ but again, there’s a lot of uncertainty,” he said. “The dire fiscal situation in both the Virgin Islands and Puerto Rico is somewhat unprecedented.”
