The projections suggest that the economy will end the current fiscal year with a fall of 11 percent to overcome with a positive growth of 8.4 percent in fiscal year 2019. (horizontal-x3)
The projections suggest that the economy will end the current fiscal year with a fall of 11 percent to overcome with a positive growth of 8.4 percent in fiscal year 2019. (GFR Media)

Economic projections in the revised Fiscal Plan show a very optimistic scenario which depends on factors that are not in control of Puerto Ricans, such as the transfer of billions of dollars from the federal government and multi-million dollar disbursements from insurance companies.

The scope of this optimism depends on the evaluation. Vicente Feliciano, economist, for example, has doubts about the projections after 2019. Antonio Fernós Sagebién, economist as well, also perceives that the figures are inconsistent with the Puerto Rican reality.

The projections suggest that the economy will end the current fiscal year with a fall of 11 percent to overcome with a positive growth of 8.4 percent in fiscal year 2019. Projections of the International Monetary Fund estimate that the emerging market economies such as India and China, which for years have been among the fastest growing economies on the planet, will grow in 2019 at rates of 7.8 and 6.4 percent, respectively.

"According to this (the new revision of the Fiscal Plan), no other country in the world will grow more than us. Neither India nor China will grow more, "said Fernós Sagebién.

However, Feliciano, understand these fluctuations as reasonable. He argued that the fall of the economy is due to the damage caused by hurricane Maria and the slow restoration of Puerto Rico´s power grid. He estimated that once the energy system is restored, commerce and production of goods and services will return to normal. This normalization will lead the economy to grow since growth comparisons are made with the previous year figures, when commerce was damaged by Hurricanes Irma and Maria.

"The issue in these two years is that the stronger the fall of 2018 will be, the stronger the 2019 recovery will be. The reason is simple: 2018 collapsed with Maria and lack of power. If in 2019 we do not have another hurricane and we have power, there will be economic improvement, not because there is real growth, but because the comparison is done with the previous year and the economy was really bad that year due to the hurricane, "said Feliciano.

But Feliciano was doubtful about the idea that during the years following 2019 the economy will remain several percentage points in positive territory.

"They reveal a higher growth than that initially projected," said Feliciano.

The changes in the fiscal document are justified by arguing that this would be the effect of an $ 18 billion increase in the federal funds injection into the economy for the next five years.

Debt repayment 

In fact, the fiscal document proposes that primary surpluses will reach, on average, an amount to $ 569 million annually. This money, according to Feliciano, is what would be available for the Puerto Rico debt repayment. This amount is lower than the one estimated in the fiscal plan that was certified in March 2017, but higher than the one projected in January, when the government submitted the fiscal document first review.

"The fiscal plan states that we can have about $ 600 million for debt service. It says

 that we can pay between $ 10 billion and $ 20 billion and that is far from the total debt. It is obvious that the government of Puerto Rico´s request to the Board is to make significant cuts in the public debt. The Board has already followed the line that significant cuts are required. We have to see what the judge (who deals with the cases of Title III or territorial bankruptcy, Laura Taylor) Swain determines", said Feliciano.

Inconsistencies

On the other hand, Fernós Sagebién questioned some details of the fiscal document. For example, he noted that within a six-year period, revenues on tax paid by foreign manufacturing companies (Law 154) accumulate over $ 1 billion more than the previous version of the fiscal plan.

"I do not understand how it changes and increases so much with what has happened in this sector", said the university professor in reference to new federal taxes on this manufacturing area.

Likewise, he said that the inflation rates projected in the fiscal document seem to be similar to the price index trends prepared by the Planning Board.

Had these data been used as inflation, they would have incurred in a serious methodology problem, because this index shows a very limited view of the prices behavior in the market.

He also said that, even with the federal government allocation of $ 16 billion or $ 18 billion for the reconstruction of Puerto Rico and Medicaid program, the economic injection in the coming years is very uncertain.

He explained, for example, that a good portion of the money expected to be used for the recovery comes from insurance companies. "You have to consider that many of the claims that are being made, are being denied. You also have to see the adjustment level made by insurance companies", he said.


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