As one of the largest social and humanitarian disasters in the American homeland, remarkably little coverage has been devoted to evaluating the economic consequences of Hurrican Maria. Here is a high frequency index, the GDB-EAI (Government Development Bank-Economic Activity Indicator):
The growth rate of this indicator with GNP at the annual frequency over the 1982-2016 fiscal years is 0.78, R2 = 0.91. It is based on nonfarm payroll employment, electricity generation, gasoline sales and cement production. The indicator is calculated in a manner similar to that used by the Conference Board for its coincident index (description here).
The decline from August to December was 14.3% (log terms), or an annualized rate of 43%.
Estimates of aggregates are hard to come by. Brad Setser has presented some of the most comprehensive assessments of the challenges Puerto Rico has, and is now, confronting. Here I rely on IMF World Economic Outlook data and forecasts for data. Here are the data in levels and growth rates (calculated as log differences).
Figure 1: Log level of Puerto Rico GDP in constant dollars (blue) and population (red), normalized to 2016=0. Light green shading denotes estimates and IMF projections (see page 236 of IMF WEO. Hurricane Maria made landfall September 20, 2017. Source: IMF World Economic Outlook database (April 2018), and author’s calculations.
Figure 2: Growth rate of Puerto Rico GDP in constant dollars (blue) and population (red), both calculated as log first differences. Light green shading denotes estimates and IMF projections (see page 236 of IMF WEO.. Hurricane Maria made landfall September 20, 2017. Source: IMF World Economic Outlook database (April 2018), and author’s calculations.
Note the 8% (log terms) shrinkage in Puerto Rico’s GDP in 2017 (7.7% in log terms). No US state has experienced a comparable decline in the past 20 years, save Michigan and Nevada in 2009 (although keep in mind that the PR decline is concentrated in the last 4 months of the year).
Brad Setser assesses the government’s rosy projections (regarding GNP, not GDP).
It is hard not to conclude that leadership on this issue is sorely lacking. Over 3 million of our fellow Americans wiil suffer as a consequence.