Part I of five-part series “Austerity on the Island”
Puerto Rico, with more than $70 billion of bonds at stake, has become the latest testing ground of austerity as the right prescription for an economy in decline.
The Oversight Board has embarked on a strategy that leans toward conservative prescriptions to restore fiscal discipline and economic growth as the territory undergoes its historic debt restructuring. In this five part series, The Bond Buyer examines whether the board’s approach is likely to succeed, and reviews academic research on economies where the strategy has been applied and the impact austerity has had on vulnerable populations such as Puerto Rico’s. It also explores alternative measures that may be needed to guard against a repeat of the crisis that led to the biggest municipal bankruptcy in U.S. history.
Now, after nearly two years of economic growth following Hurricane Maria’s devastation, reports from the Economic Development Bank for Puerto Rico signal the economy may have resumed the decline experienced from 2006 to Hurricane Maria’s arrival in September 2017. The bank’s economic activity index has declined four out of the last five months on a year-over-year basis.