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The Return Of Growth
By FRANCISCO JAVIER CIMADEVILLA
January 22, 2004
Hallelujah! The much-awaited economic recovery seems to have finally started.
Mind you, its only a start. Nevertheless, economic news from the U.S. mainland and early signs locally give top business leaders from every industry in Puerto Rico reason to assert almost unanimously and without hesitation that 2004 will be a good year for the islands economy.
Amen to that. For three years, weve been itching for a good year to come along. Time and time again, expectations of local business picking up were dashed for one reason or another: the recession stateside, 9/11, the war in Iraq, and a do-nothing local government administration incapable of getting its act together, particularly when it comes to managing the economy.
In 2002, for the first time in 20 years, Puerto Ricos economy actually shrank. Last year was better, but 2% growth in the wake of negative growth the year before was nothing to write home about. This year, the consensus among local economists is that well see local growth in the order of 3% to 3.5%.
Besides the economists, dozens of top businesspeople from every industry in Puerto Rico, the folks who are actually on the front lines of the economy, confirm the growth projections for the year. By the time we interviewed them for our Economic Outlook edition, most of them had just finished planning the year for their respective businesses. So they know whats coming. And almost without exception, they agree that their businesses will fare better this year.
The reasons vary from industry to industry, but there are three common denominators.
First and foremost, businesspeople point to the almost sure recovery of the stateside economy that started in the last two quarters of 2003 and has analysts projecting 4% growth this year. Key factors fueling that growth will be continued government defense spending toward the war effort, stable interest rates in the absence of any inflationary pressure, and the added stimulus to consumer demand and capital expenditures by businesses as a result of the Bush tax cuts.
Second, the local economy will get a boost from this years election cycle. The advertising industry in particular will get a nice chunk of change, but everyone will benefit from the expected upswing in election-year construction. Its common knowledge that governments typically boost public-works spending in an election year. This year, however, it will be a lot more than road repavement. Judging from statistics on construction permits, we are likely to see a good number of major infrastructure projects that had been stopped for so long finally moving forward.
Third, there will be a moderate improvement in the unemployment situation. Already some businesses have started to hire again, some making up for layoffs they had to do in the past three years as a belt-tightening measure. Employment in construction should pick up considerably; one local economist estimates the boost in public-works construction alone should add between 10,000 and 15,000 jobs this year. In addition, and contrary to the doomsday scenarios of the tired Section 936/956 cheerleaders, the manufacturing industry, particularly the pharmaceutical sector, is already hiring in order to staff up and crank into production mode the massive plant expansions that have been completed or should be this year.
So, you see, theres light at the end of the tunnel after all.
This Caribbean Business article appears courtesy of Casiano Communications.