Puerto Rico's GDP decreased by 2.5% amid rising imports

Economics
Webp om500yflz6jffh6yczfdid88u5rq
Vipin Arora Director of U.S. Bureau of Economic Analysis | Official Website

Real gross domestic product (GDP) for Puerto Rico decreased by 2.5 percent in 2022 after a 4.1 percent increase in 2021, according to statistics released by the U.S. Bureau of Economic Analysis. The decrease in real GDP was attributed to an increase in imports, as well as declines in private fixed investment and exports. However, personal consumption expenditures, private inventory investment, and government spending saw increases.

Real imports rose by 7.3 percent, driven primarily by pharmaceuticals and organic chemicals, which grew by 21.7 percent. This growth outpaced the expansion of the pharmaceutical manufacturing industry’s exports.

Real private fixed investment fell by 4.6 percent. Investment in intellectual property products dropped by 24.7 percent, while spending on equipment and structures increased by 4.3 percent and 2.1 percent respectively.

In Puerto Rico, research and development spending predominantly constitutes investment in intellectual property products by computer service providers and other businesses. The primary driver for the increase in equipment investment was information processing equipment purchases, including medical instruments by businesses. The rise in structures investment was led by nonresidential projects aimed at expanding renewable energy generation.

Real exports decreased slightly by 0.3 percent due to a significant drop of 14.6 percent in services exports, which was partially offset by a 2.9 percent increase in goods exports.

The leading factor behind the decline in services exports was “other services,” which includes computer services; however, this was somewhat balanced out by travel services purchased by tourists and nonresidents in Puerto Rico. The growth in goods exports was mainly due to a 2.6 percent increase in pharmaceuticals and organic chemicals.

Real personal consumption expenditures (PCE) rose by 2.2 percent with PCE services increasing by 5.5 percent while PCE goods declined by 0.7 percent.

The rise in PCE services reflected broad-based growth, notably driven by recreation services such as live entertainment categorized under “other services.” Conversely, the decrease in PCE goods was largely due to a decline in motor vehicles and parts sales; unit sales of motor vehicles dropped by 4.3 percent after surging by 35.9 percent in the previous year.

Real private inventory investment increased significantly with the manufacturing sector being the largest contributor.

Government spending saw a modest increase of 0.4 percent due to heightened federal, central, and municipal government investments related to disaster recovery activities from Hurricanes Irma and Maria (2017), earthquakes (2019-2020), and Hurricane Fiona (2022).

Several updates were made to Puerto Rico's GDP data:

- Financial data from companies registered with the Puerto Rico Department of State.

- Tax return tabulations for corporate businesses from the Puerto Rico Department of Treasury.

- Updated business inventories and sales data from the Puerto Rico Planning Board.

- Newly available audited financial statements for various government entities.

- A report on research and development investments from DDEC.

- Declared sales data from monthly Sales and Use Tax Returns.

- Shipment data from the U.S Census Bureau’s International Trade report.

- A new report on utility-scale electric power technologies from the U.S Energy Information Administration.

The revised estimates align closely with previously published inflation-adjusted GDP growth figures.

Acknowledgments go to several organizations including Discover Puerto Rico, Economic Development Bank for Puerto Rico’s Office of Economic Studies, among others.