Promising developments on horizon
A University of Guam study predicts that the Guam economy is still growing but will do so at a slower rate in 2019, with promising developments on the horizon.
UOG professor of Economics Maria Claret Ruane, who gave business and government leaders a Guam economic update over lunch on March 13 at the Hyatt Regency Guam, highlighted new data and her latest predictions since the December release of the “2018 Guam Economic Report” by the Regional Center for Public Policy at UOG’s School of Business & Public Administration.
“The theme seems to be our economy is growing, except that that growth has been slowed,” Ruane said. “But there are some really promising developments.”
The last three years of available data show growth of 0.5 percent in 2015, 0.3 percent in 2016, and 0.2 percent in 2017.
“I am predicting zero growth to a half-percent decline for 2018,” she said. “When I see the numbers and we come out the same as last year, it’s good news—just to stay where we’re at.”
She predicts the same zero growth to a half-percent decline for 2019, an improvement over the possible -1 percent growth she shared in December.
Co-authored by Ruane and research fellows Alex Aflague, Rebecca Casimbon, and Luisa Tenorio, the report likens Guam’s $5.2-billion economy to a three-legged stool,: tourism, the military and federal government, and local businesses, consumers, and government.
Updates from her presentation include:
– Tourism arrivals were down 2 percent in fiscal 2018 but are starting an upward trend, assisted by a recovering Japan market.
– Federal government spending in Guam increased in fiscal 2018, with $350 million approved for Guam in the National Defense Authorization Act. She predicts the NDAA funding of $450 million for fiscal 2019 to be safe but could decrease in 2020.
– Local consumer spending is flat but could show a slight increase in 2018 once the data is available.
– Business spending was down in 2018 as a possible result of uncertainty with the election year and the lack of H-2B visa approvals. The H-2B situation has worsened in 2019 with the ban on H-2B workers from the Philippines.
– The federal government shutdown in December and January shouldn’t have an effect on the macroeconomy because spending from those paychecks still took place once they were received.
– Unemployment has improved — down to 3.8 percent in June 2018 from 4.4 percent in March.
– The number of those not participating in the workforce is down as well, from 51,660 in March to 49,380 in June.
– Wages have been increasing, up 3 percent in the private sector and 2.8 percent in the government of Guam over the span of March to September 2018.
– Inflation was present at 2.6 percent in 2018 but is considered low, and average wages kept pace with inflation.
Significantly, the inflation rate in 2018 reflected some of the effect of the Business Privilege Tax increase from April, which hasn’t impacted prices as much as expected.
“Inflation less than 5 percent is still pretty much predictable. As businesses, you can still make plans expecting prices will go up, and it’s not something to keep investors from investing into our economy,” she said.
This economic report is an example of how UOG can partner with the local community, UOG president Thomas W. Krise said.
“The University of Guam can be part of the solution to every problem that we face in Guam and the region,” he said. “This report is an important way of looking into the future and seeing the opportunities and threats that are facing us and thinking of ways that the university can help.”
The dean of SBPA, Annette T. Santos, said the Regional Center for Public Policy, which is now in its third year, was developed to capture the data and research behind the various projects happening within the school.
“We hope that this economic report serves as a resource to plan business ideas and business strategies and that it moves beyond Guam as we engage members of our regional community as part of this forward movement in economic development,” she said. (UOG)