Editor’s note: Today only, Claro is sponsoring free all content for El Nuevo Día subscribers. Starting Saturday, this content will become exclusive again. If you want to support responsible journalism, subscribe here.

Puerto Rico’s economy could close in negative territory this fiscal year, despite the multimillion-dollar federal funds that have flowed to the island, according to a Moody’s Analytics study.

---

Lee este artículo en español.

---

According to projections presented by Gustavo Rojas Matute, Moody’s economist, real Gross Domestic Product (GDP) -adjusted for inflation- could fall by approximately -0.2% in fiscal year 2025.

Although the island’s economic forecast for the next 10 years will be sustained by the disbursement of federal funds, Moody’s does not see growth, but rather a statistically stagnant economy, since the island reached the top of its employment level, explained Rojas Matute.

“What is happening is that what is going to sustain the economy is basically the disbursement of those funds over the next decade. That is what is going to help sustain, above all, employment. What is happening is that the economy is no longer growing, because it has reached full employment,” the economist said in response to questions from El Nuevo Día.

Data from the Department of Labor and Human Resources (DTRH) indicate that last August, the labor participation rate was 43.9%, while the seasonally adjusted unemployment rate last August was 5.7%, a figure that the economist estimates will remain close to 6% in the medium term.

However, Rojas Matute pointed out that the aging of the population and the decrease in the number of employed people could give a statistical panorama in which “employment in relative terms will grow and unemployment will decrease, which is not necessarily very positive in terms of losing population”.

The study by Moody’s, one of the credit agencies that evaluated Puerto Rico’s credit until the U.S. territory declared bankruptcy in 2017, was presented yesterday during a video call to the Legislative Assembly Budget Office and was open to the press.

During the presentation, discrepancies between different estimates about Puerto Rico’s economy came to light. While official estimates assure that the economy will continue to grow, others, such as Moody’s analysis, point to a decrease in GDP in real terms for the current fiscal year.

The forecasts of the Planning Board and Focus Economics -a specialized magazine- project an economic growth of 1.4% and 0.7%, respectively. Meanwhile, analyses by the Fiscal Oversight Board (FOMB) and Moody’s estimate a drop between 0.8% and 0.2%, respectively.

“What this disparity shows is the uncertainty that exists regarding the economy. We don’t know, for example, the fiscal impacts or the impacts of federal aid,” Rojas Matute responded.

The economist noted that when considering Puerto Rico’s potential and comparing Puerto Rico’s economic growth rate with other U.S. economies, “Puerto Rico’s numbers are the weakest.

Although Moody’s paints a negative outlook, its new reading is better than it previously estimated.

“We changed our position on Puerto Rico. We had estimates, until a few months ago, a little bit more negative, home prices falling and GDP also falling over time. But analyzing and looking at the fundamentals, it didn’t seem very logical to us,” the economist said.

The firm made some reestimates in its model and concluded that “GDP has reasons to continue growing, but so do home prices,” said Rojas Matute.

Moody’s projections also anticipate weak home price growth in Puerto Rico versus other U.S. jurisdictions.

“We are more optimistic with respect to what we had previously, but in terms of comparison with the rest of the United States, we are still a little pessimistic, because (Puerto Rico) does not have the same level of performance,” said Rojas Matute.

The economist indicated that Puerto Rico should emulate the economic growth reflected in the southern states of the country, such as Florida and Texas.

To get an idea, last April, the Texas Bureau of Economic Analysis reported that the state grew by 5% during the fourth quarter of 2023. Meanwhile, data from the Planning Board confirmed that Puerto Rico’s GDP increased just 0.7% in fiscal year 2023.

---

This content was translated from Spanish to English using artificial intelligence and was reviewed by an editor before being published.