Puerto Rico Economy Forecast to Shrink 0.8% in Fiscal 2014

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from Bloomberg Businessweek,

Puerto Rico officials project the commonwealth’s economy will shrink by 0.8 percent this fiscal year, a reversal from an earlier estimate calling for an expansion.

The flagging growth is a blow as the island of 3.7 million struggles to turn around its finances. The Planning Board, which released the data today, previously said the economy would expand by 0.2 percent in the year that began July 1.

Governor Alejandro Garcia Padilla, 42, who took office in January, is trying to keep the commonwealth’s investment-grade rating. It is currently ranked one step above junk, and its securities are on pace for their worst year since 2008 on concern that a contracting economy may make it harder for the territory to repay its debts.

Economic Output since 2004, -16%.

Unemployment rate, 13.9%.

Population change since 2004, -4%.

Tourism revenue since 2007, -15%.

Standard & Poor’s has threatened to lower Puerto Rico by one level “if the economy deteriorates to the point we believe it significantly hampers the ability to lower budget deficits,” David Hitchcock, an analyst at the New York-based company, said in an Oct. 23 report.

A Puerto Rican default would rock the mini market – 77% of muni-bond funds own the islands debt.

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