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Guam grew 1.7 percent in 2009, CNMI shrank 20 percent

By Mar-Vic Cagurangan and Gemma Q. Casas HAGÅTÑA, Guam (Marianas Business Journal, Aug. 1, 2011) – For Guam and the Northern Mariana Islands (NMI), it was the best of times, it was the worst of times - respectively. The latest gross domestic product report from federal agencies showed the two sister islands - 141 miles from each other - were heading toward opposite directions.

The report released on July 18 by the Bureau of Economic Analysis showed Guam's economy expanded by 1.7 percent in 2009, following a .5 percent growth in 2008, on the back of increased federal spending.

In contrast, the NMI plunged 19.8 percent resulting from the death of the garment industry that used to fuel the commonwealth's once booming economy.

The year covered by the report represented the period when the two insular territories were at the height of undergoing major changes that triggered various factors contributing to the state of their respective economies.

In 2008 and 2009, the federal government was preparing Guam for the military buildup, hence the millions in federal investments.

"The majority of this spending was by the Department of Defense. Federal spending increased in both 2008 and 2009; the increases in both years largely reflected increases in construction spending and in compensation," the BEA report stated.

The report, however, noted the weakening of tourism, the economic driver for Guam. The decline in arrival numbers between 2008 and 2009 "negatively impacted" Guam's economic growth, according to the report. "Spending by tourists makes up the vast majority of Guam's exports of services. Real exports of services declined 9 percent in 2009 after falling 12.1 pecent."

The real consumer spending fell 1.5 percent after remaining unchanged in 2008.

But just the same, Guam's economic performance fared well in comparison to the national economic activity. "For comparison, the real GDP for the U.S. (excluding the territories) decreased 2.6 percent in 2009 after remaining unchanged in 2008," the report said.

However, the 2010 Household and Per Capita Income report showed economic growth is not keeping pace with its population growth, the report showed.

The household and per capita income 2010 report showed the per capita income for 2010 is US$12,864, a decrease of US$225 or 1.7 percent. The island's average household size also increased to 3.8 persons from 3.5 during the same period.

Meanwhile, the NMI marked the years leading to the death of its garment industry with unprecedented economic hardship. The year when the last factory shut down showed a sharp decline in its economic activities with a 19.8 pecent drop on the island-chain's real gross domestic product.

According to the BEA's report, the NMI posted GDP estimates of US$847 million in 2008 and US$716 million in 2009.

"The decrease in exports of goods in 2008 and 2009 reflected the continued decline of the CNMI's garment manufacturing industry. The last garment factory closed during the first quarter of 2009," BEA reported.

"Further contributing to the decline in real exports in 2009 was a significant drop in exports of services, reflecting a decrease in the number of visitors to the islands," it added.

Consumer spending also sharply declined during the 2008-2009 period, further impacting economic growth on the islands.

BEA data showed real consumer spending in the NMI fell by 13 percent in 2009 after a 1 percent decline in 2008.

Fewer people now reside in the NMI following a mass exodus of migrant workers to their home countries of China, the Philippines and elsewhere with the demise of the garment industry.

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