An uncertain future for the US Virgin Islands’ economy
With the ongoing pandemic, the 5 permanently inhabited US territories—the Northern Mariana Islands, Guam, American Samoa, and Puerto Rico—have been facing some economic challenges. These territories rely on borrowing through markets to fund numerous operations. A shrinking economy, worsened by the pandemic challenged many of these islands’ primary sources of income: tourism, and likewise their ability to fund public infrastructure projects and local government initiatives.
The US Virgin Islands’ economy is a prime example of this crisis. The territory’s employment level fell 9.5% from February 2020 to October 2021 according to New York Federal Reserve Bank data. While the full effects of the pandemic on the economy of the US Virgin Islands are not fully known, one reason experts from Moody’s Analytics believe explains the USVI’s economic performance is a “small and highly concentrated economy.”
The US Virgin Islands’ total public debt outstanding as a share of GDP, according to an analysis from the US Government Accountability Office, “increased slightly from 68 to 69 percent of GDP between fiscal years 2016 and 2018.” The USVI’s ability to repay their debt may be impacted by the pandemic’s negative impact on tourism, the islands’ primary industry. The stimulus payments enjoyed by many other states had experienced drawbacks in regards to distributing these payments to the US territories. Instead of being distributed through the IRS, local tax authorities issued these payments which created an unnecessary burden with filing additional paperwork on inhabitants of these regions and the potential that some eligible people will be overlooked.
Because of previous federal funding in the form of natural disaster relief, some observers are optimistic about the state of the USVI’s economy. Others are more hesitant especially due to the sparse distribution of cruise ship arrivals which consist of “the largest source of visitor arrivals to the territory pre-pandemic.” The reduction of the US Virgin Islands’ opportunities for economic growth and diversification due to the pandemic, previous natural disasters, and the indefinite closure of numerous oil refineries is still playing itself out. At this time, it is unclear whether air travel rebounding and significant government spending will be enough to help the islands recover.