CNMI economy declines in second quarter

Key segments of the CNMI’s economy such as banking, tourism, and car sales are showing signs of serious decline yet government spending is on the rise, according to a second quarter economic report issued Friday by the Department of Commerce.

“It’s clear that our economy is going through a difficult period right now,” James Arenovski, president of the Saipan Chamber of Commerce, said in an interview, adding that Saipan’s unreliable electric power system, private sector fears over the pending federal takeover of the CNMI’s immigration rules, and the slow death of the local garment manufacturing industry have all contributed to the “instability and uncertainty” businesses are experiencing.

Spokesman for Gov. Benigno Fitial, Charles Reyes, echoed those sentiments, saying the recent arrival of new emergency electricity generators on Saipan could ease some of the troubles the private sector has endured through 2008.

“The game plan right now is to deal with the most pressing issue, to provide a stable power supply, and we’re going to do that with the Aggreko deal,” Reyes said, adding the Fitial administration is also vying to “mitigate the enormous devastation” the administration anticipates federal immigration controls will cause in the CNMI.

In the 16-page report, Commerce notes, for example, that the amount of money deposited in local banks fell an estimated $37 million beneath that seen in the first quarter of the year to $478,850,000. The amount loaned by the CNMI’s banks has dropped by about $7 million compared to the first quarter to $ 149,140,000.

Automotive sales—a major indicator of the economy’s health—are down by 24 percent below first quarter figures, the report says, with a mere 155 new cars and 71 new cars sold in the second quarter. This decline represents a 13-percent drop compared to the second quarter of 2007.

One of the primary economic engines in the local economy, the tourism industry, took a major hit in the second quarter due to a 15-percent drop in visitor arrivals below first quarter numbers. Commerce reports tourist arrivals are down to an estimated 94,000. This marks a 10-percent increase over visitor arrivals in the same period last year, however, but that modest gain pales in comparison with the major decline in tourism the CNMI has seen in recent years. In 2004 alone, for example, the CNMI played host to more than 589,000 visitors while last year it received an estimated 389,000.

Average hotel rates in the CNMI are also down roughly 8 percent beneath first quarter figures while hotel occupancy rates have fallen by more than 19 percent.

Meanwhile, imports to the CNMI have risen by more than 6,000 tons over last quarter with imports of petroleum, oil, and lubricants showing the largest jump. These gains are roughly 9,000 tons less than the amount of imports seen in the second quarter of 2007.

The value of exports from the CNMI, however, declined in the second quarter by more than 46 percent below the first quarter’s total to an estimated 25 million, 67 percent less than the value of exports seen in the second quarter of 2007.

In contrast to the declines seen in private sector figures, government spending has nonetheless risen during the second quarter by almost 6 percent over the first quarter’s total and by more than 22 percent over the same period in 2007, the report notes. In the first quarter of 2008, government spending totaled $43,900,000. In the second, the government spent $46.4 million. Overall government spending, however, has fallen in recent years. For example, the report notes that in 2005, the government spent $224,100,000 but in 2006, that figure slipped to $195,600,000. In 2007, government spending totaled $162,700,000.