The territory’s economy shrank in 2013, indicating the territory remains mired in recession, with gross domestic product decreasing 5.4 percent to $3.79 billion last year, according to data released Tuesday by the U.S. Commerce Department’s Bureau of Economic Analysis [BEA V.I. GDP Report].
The report contrasts the territory’s economic drop with the tepid, 2.2 percent growth in the national economy in 2013. It cites ongoing damage from the 2012 shuttering of the Hovensa refinery as the main culprit.
Leaving aside petroleum refining, "GDP would have increased 0.6 percent in 2013 … reflecting growth in tourism services and in exports of rum," the report says.
According to the BEA report, visitor arrivals increased 2.2 percent and rum exports increased about 22 percent. Consumer spending decreased, however, led by decreases in spending on nondurable goods, including decreases in spending on food and beverages.
The report included more detailed data for 2012. Total employee compensation decreased significantly from $2.1 billion in 2011 to $1.9 billion in 2012, according to the report. Private industry employee compensation dropped from $3.43 billion in 2011 to $3.35 billion in 2012, with all of the loss coming from "goods-producing industries."
Total government employee compensation decreased from $863 million to $796 million from 2011 to 2012. The report cites the Virgin Islands Economic Stability Act, signed in July of 2011, which reduced government salaries by 8 percent for two years, as a major cause. Also the government laid off hundreds of employees out of financial necessity in 2012.
A recession is generally defined as two or more quarters of negative growth. The BEA data released this week does not include quarterly figure, but the report indicates this is the third consecutive year of GDP decreases, with a 7.5 percent reduction in 2011 and a 13.8 percent reduction in 2012.
The declines strongly suggest the territory has been deep in recession for most – and very possibly all – of the past three years.
