Make good use of recent economic analysis | Featured columnists

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Over the past two weeks, we’ve been talking about concerns about Guam’s overall economy, government spending, and government debt. Recently, the Government Accountability Office (GAO) released a report on the outlook for the public debt of the five US territories: Guam, Puerto Rico, US Virgin Islands, CNMI, and American Samoa. As noted in the report, Puerto Rico has accumulated a “huge amount of debt” and defaulted on up to $ 1.5 billion since 2015. Congress in turn passed PROMESA, Puerto Rico’s law on the management of surveillance and economic stability, which required a periodic study of the public debt of each territory.

Public debt trends

In this first report since the adoption of PROMESA, the study examined the trends in public debt from 2005 to 2015, the public revenue models of the same period, the capacity of each territory to repay its debt and why each territory gets into debt. . While some information is objective, some information such as why a territorial government is in debt and what the main factors are is determined, among other things, through interviews with governors, officials in governor’s offices and entities. government responsible for issuing the debt, which in our case would be the Guam Economic Development Authority. In order to determine the ability to repay debt, GAO says it looked specifically at three things – the use of debt to finance government operations, the dependence of a territory’s economy on a single industry and pension commitments.

In the 88-page report to the House and Senate natural resources committees, GAO says Guam’s debt more than doubled from 2005 to 2015, from $ 1 billion to $ 2.5 billion, almost all of this increase occurred between 2008 and 2015. Public debt as a percentage of gross domestic product increased from 22 to 44 percent. It was widely reported in the news. The fact that the report indicated that this bond debt was mainly owed to federal bonds was also the subject of heated debate. However, upon closer examination, the report actually indicates that it was Guam government officials who said most of Guam’s bond debt is primarily used to comply with federal requirements and court orders.

Disturbing factors

According to the report, Guam’s general revenue grew an average of six percent each year from 2007 to 2015, a prolonged period of economic growth and stability. This growth is attributable, according to administration officials, to growth in tourism and new construction. This growth in tourism itself has been attributed to the increased number of airlines to Guam, a favorable exchange rate, as well as the economic prosperity and stability of major tourism markets. These particular factors are now troubling as we have clear indicators that some have turned around in recent weeks. With a decrease in the number of airplane seats, an unfavorable exchange rate according to GVB and instability in the region, this seems to be a recipe for the slowing economy. As these are recent developments, the GAO report ignored them.

The recent reports and analyzes of the economy, debt and income of Guam have been a welcome objective analysis. It is up to us to use this analysis and make prudent decisions about the direction of public spending and borrowing.


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