2021 Economic Outlook

Due to the fragility of the local economy, continued recovery from Hurricane Maria, emigration from the island, the 2020 earthquakes, and COVID-19, the unemployment rate is forecast to be 20% and it is estimated that 10,000 small businesses have been lost.  Counter measures include economic recovery post-Maria, federal funding for SNAP, NAP and Cares Act, federal reform, and the fiscal control board.

Private employment increased to 6,100 in July, likely reflecting the reopening of commercial activity rather than the creation of new jobs. No significant changes are expected for August and September.  This positive trend comes after a loss of 124,300 private jobs in April, rising by 19,900 and 23,600 in May and June respectively.  Pandemic-affected job losses continue to be high in some sectors: 30.4% in accommodation and food services, 25% in construction, and 13% in retail trade.

According to the most recently available information, 31% of the $49b allocated to Puerto Rico for Hurricane Maria disaster funds ($15.4b) have been disbursed.  Of the Community Develop Block Grant (CDBG) Funds, which account for 41% of the total, only $1.0b have been disbursed.  The process, though, has continued, with additional funds from FEMA and other sources being approved. The FOMB revised its previous estimates and flows of the disaster relief funding.  The surge in disbursements of CDBG funds was moved to fiscal years 2023– 2024, extending through 2032.

The unfolding recession and high unemployment is expected to depress consumption.  E-commerce adoption is likely to accelerate across a wide range of categories. Puerto Rico continues its trend towards a smaller and older population, with 2019’s 3.1m population expected to reduce by a further 100,000 by 2025.  This trend could be exacerbated by COVID encouraging further relocation to the US mainland.

Estudios Tecnicos projection models indicate negative growth of -1.1% in fiscal 2020.  Significant stimulus spending as well as continuation of the recovery process is expected to absorb most of the remaining COVID-19 impact in fiscal 2021, resulting in modest growth of .7%.  Boosts in construction investment, as well as disappearance of the coronavirus shock, are expected to reflect in significant growth for fiscals 2022 (1.5%) and 2023 (2.4%).  The growth acceleration in 2022 and 2023 is led by the inflow of CARES Act funding and an increase in investment in construction, as the greater disbursements of CDBG-DR funds takes place, and an improvement in the labor market is expected.  Much depends on how quickly federal CDBG-DR funds and others are disbursed and invested. There are multiple risks that will impact projections, including those related to the COVID-19 epidemic and policy changes at the federal level. The hurricanes, earthquakes and now the COVID-19 situation have generated needs and opportunities for economic activity.

December 21, 2020 – Update:  Democrats successfully fought for $13 billion to increase SNAP benefits by 15%, provide additional funding for food banks and senior nutrition programs, and to ensure college students have access to SNAP. This bill also dedicates $614 million for nutrition assistance for Puerto Rico and the territories, allocates emergency funds for school and day care feeding programs and includes critical improvements to the P-EBT program. The bill also included $13 billion for direct payments, purchases and loans to farmers and ranchers who have suffered losses due to the pandemic. It also includes funds to support the food supply chain through food purchases, donations to food banks, and support for local food systems.