Federal Aid Inflows Will Keep Puerto Rico's Current Account Surplus Wide

• Puerto Rico will continue to run wide current account surpluses in the coming years, benefiting from strong inflows of federal aid related to hurricane reconstruction and Covid-19. Fitch Solutions forecast Puerto Rico’s surplus will narrow to 14.5% of GNP in the Fiscal Year 2021 (FY21; July 2020-June 2021), from 17.3% in FY20, as imports recover more quickly than exports in the near term.
• Despite a narrower goods and services surplus, strong federal aid inflows will keep Puerto Rico’s overall current account in surplus. The federal government has allocated tens of billions of dollars to Puerto Rico to help its recovery from 2017’s Hurricane Maria and a series of earthquakes in early 2020, which was supplemented by aid from the CARES Act and American Rescue Plan stimulus bills passed in 2020 and early 2021.
• Risks to aid inflows have diminished significantly under the Biden administration. Former President Donald Trump was generally critical of aid for Puerto Rico, arguing that it would be stolen or wasted, and his administration repeatedly put holds on spending assigned by Congress. In contrast, Biden’s administration has taken a number of steps to increase the flow of aid to the island, including removing restrictions on aid from the Department of Housing and Urban Development and funding for education.

 

(Source: Fitch Solutions)