The government is shooting for Puerto Rico to post 2 percent economic growth by 2018, according to La Fortaleza chief of Staff Ingrid Vila, adding that consultants have said will require some $12 billion in investment.
The plan, which is also directed at paring down debt totaling $73 billion, follows already announced priorities such as improving schools, boosting tourism, growing the agriculture industry, and cutting Puerto Rico’s sky-high power rates, among other things.
Puerto Rico’s economy is still shrinking but at the narrowest rate in more than a year, according to the Government Development Bank’s latest Economic Activity Index.
The EAI for March fell by 0.8 percent compared to the same month in 2013, posting a 16th straight monthly drop on a year-over-year basis. Last month’s decline, which followed a 2.5 percent drop in February, was the shallowest since February 2013.
The EAI - which measures employment, electric power generation, cement sales and gasoline consumption - has now risen for three straight months on a month-over-month basis.
However, the EAI is down 3.4 percent through the third quarter of fiscal 2014 when compared to the same 9-month period in fiscal 2013 (July-March). The index had returned to growth in December 2011 for the first time since Puerto Rico’s recession began in 2006. It showed small but consistent year-over-year gains for nearly a year before beginning to retreat again in November 2012. The index has dropped every month since.
Puerto Rico is also grappling with population loss, marked by the so-called “brain drain” flight of young professionals, that has picked up during a marathon economic recession. Meanwhile, the birth rate has fallen and the population has gotten older.
CARIBBEAN BUSINESS has been sounding the alarm about Puerto Rico’s declining population for years. And the downward trend shows no sign of slowing as the island’s economic downturn stretches into a ninth year.
Economists and demographers warn the population loss and related demographic trends will pose increasingly greater challenges to the island. Human resources executives note that those problems extend to island businesses and Wall Street credit ratings firms now regularly cite population loss as a key challenge for the island economy and efforts to shore up the government’s shaky finances.
The plunging population and shifting demographics represent a range of challenges for the island, including the prospect of less federal funding, a shrinking tax base and increased budget pressures, lower demand for goods and services, reduced investment and a dramatically aging population with fewer financial resources.
The issue is also increasingly raising red flags on Wall Street regarding the island’s economic and fiscal future. All three credit rating agencies – Standard & Poor’s, Moody’s and Fitch – have cited the population decline in recent reports on their downgrades of Puerto Rico’s credit to junk level.
The administration of Gov. Alejandro García Padilla on Tuesday released details of an economic recovery plan aimed at pulling debt-plagued Puerto Rico out of a recession dating back to 2006.
PR aims for 2% economic growth by 2018
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