Puerto Rico’s already-battered economy stands to lose between $3 billion and $3.9 billion during a month-long lockdown and as much as $10.1 billion if the period stretches to three months, according to a study released by ABEXUS Analytics.
The local startup that specializes in using analytics-related technology to help businesses connect data and the performance of the rest of the economy put out a study on the economic impact of COVID-19 and the implications for an Island-economy that has been struck by several large-scale disasters in the past few years — Hurricanes Irma and María, and a 6.4 earthquake earlier this year.
The report titled “Economic impact of COVID-19 in Puerto Rico: A chain reaction that ripples through the business community” gauges the economic effects of an islandwide lockdown, which was enacted via an Executive Order from Gov. Wanda Vázquez on Mar. 15.
The report estimates a potential drop in GNP of -1.7% to -4.1% depending on the time scenarios of one or three months, respectively.
“We believe information is the key antidote to uncertainty, but such information must be widespread, accessible and contextualized,” said ABEXUS CEO Eduardo Burgos-Suazo, of the report that is free to download.
“Using our in-house algorithms, we were able to simulate the entire Puerto Rican economy, capitalizing on a data warehouse that we have been developing for our data analytics software,” he said.
Given the “novel and strong” measures the local government has taken, ABEXUS decided to monitor the potential economic effects of such measures.
“The estimates provide a fairly accurate idea of the number of lost wages each week, as well as the impact that COVID-19 has had on the tourism industry,” the executive said.
In its estimates, ABEXUS pegged losses for the tourism sector alone at between $525 million to $971 million in the one-month period, and between $820 million and $2.7 billion if the lockdown were to last three months, including the multiplier effects. So far, at least half a dozen hotels have laid off at least 2,000 people and others have closed until at least summer.
“Institutions must use this information to protect the vulnerable population, which includes the elderly, but also, those who have been marginalized by the economy, or whose livelihoods are close to an abyss by the end of each month,” said Burgos-Suazo, a Sociology and Statistics Professor at the University of Puerto Rico.
“The tourism sector in Puerto Rico is a natural incubator for multiple small- and medium-sized businesses, which are solely dependent on visitors. The COVID-19 crisis has left those businesses adrift,” he said.
Meanwhile, Adrián Alós, ABEXUS’ co- CEO and economist, said “our report is strictly based on data. We always strive to minimize the potential bias that’s embedded in expert opinions.”
“That’s why we created a set of scenarios based on the number of weeks the lockdown is kept in place. Our estimates point out a total economic loss of $4 billion if the most acute effects are sustained for a month, or almost $10 billion if these measures had a lasting effect of three months,” Alós said.
When the losses are evaluated within a greater context, it represents significant effects on the economy. For example, when compared to the total Nutritional Assistance Funding Puerto Rico receives, estimated at some $2 billion a year, or to Puerto Rico’s total budget of about $8.5 billion a year, isolating the economic impact of the COVID-19 response “is compelling,” the report states.
The report also indicates that potential loss of salaries for the first week of the lockdown that began Mar. 15 could reach some $260.9 million.