The economic impact of the pandemic in the territories

by May 21, 2020Coronavirus, Economy, Headlines0 comments

In the midst of the economic contraction brought forth by governmental measures to mitigate the spread of COVID-19, leaders the world over have found themselves struggling to assess the financial losses suchs lockdown have brought about.

Of the industries affected by the continued lockdown, none have reported revenue declines as steep as those reported in the tourism industry. This news is particularly troubling for the United States territories, whose GDPs rely heavily on revenue from either tourism or businesses that contribute to the tourist infrastructure. 

One territory whose economy has been particularly affected by lockdown initiatives has been that of the US Virgin Islands. Not only is tourism the primary source of revenue for the islands, said tourism disproportionately comes by way of commercial cruise lines; both airline and cruise companies have reported a near 100% decrease in passengers since the enactment of lockdown orders. 

Much like the US Virgin Islands, the Northern Mariana Islands’ economy is especially dependent on revenues stemming from the tourism industry, notably Korean and Chinese nationals partaking in the islands’ growing casino and gambling sector. As previously noted, the decrease in air travel has made non-essential travel practically nonexistent; this, coupled with the restrictions imposed on Chinese nationals wishing to enter the US indicate significant losses for the casinos and resorts that drive the Northern Mariana Islands’ economy. 

While the economies of American Samoa and Guam are less reliant on tourism than the aforementioned territoires (25% and 40%, respectively), the near complete halting of tourism has led to mass layoffs across businesses that rely on tourists for revenue. The economy of Puerto Rico, which at 7% dependency on tourism is the most protected of the five territories from demand shocks in the industry, has nevertheless seen its main industries unable to generate sufficient revenue due to restrictions imposed by Governor Wanda Vazquez-Garced (NPP, R). 

While policies aimed at reducing further spread of COVID-19 have thus far resulted in sizable revenue shortfalls for all five of the US territories, the current situation may present opportunities for revenue growth in Guam and Puerto Rico. With concerns over increased Chinese hegemony in a post-virus world, many in Washington see a necessity to reduce dependency on Chinese supply chains for pharmaceuticals, as well as increase military spending to counter China’s military influence in the Pacific. If pharmaceutical supply chains were to be relocated to the United States, Puerto Rico, a territory with substantial human capital with respect to pharmaceutical manufacturing, may prove a viable option. Moreover, Guam may see a significant increase in federal funding if decisions are made to increase US military presence in the Pacific, given the territory’s location and already-present military base.