Puerto Rico GNP Growth To Accelerate

• After a soft 0.7% Gross National Product (GNP) growth rate for FY 2023, Fitch Solutions forecast that real GNP will grow by 1.8% in 2024; primarily driven by stronger private consumption and investment growth, supported by resilient US demand.
• Notably, Fitch has revised its FY2024 real GNP forecast (FY2024: July 2023 – June 2024) up from 1.0% previously, to 1.8%, as tailwinds from a resilient US economy continue to support strong growth.
• While the Puerto Rican government has not updated its monthly economic indicator for Puerto Rico beyond December 2023, other high-frequency indicators continue to point to a historically strong labour force which is boosting aggregate household incomes.
• The unemployment rate remains at historic lows of 5.7% as of February 2024, while the labour force participation rate remains strong at 44.5%. Fitch forecasts that the unemployment rate will end FY 2024 at 5.9% and average the same for the entire fiscal year.
• That said, Fitch expects weaker growth in FY 2025, growing only 0.3%, as the momentum in the US economy slows, posing headwinds for the Puerto Rican economy.
• Risks are skewed to weaker growth in H2 2024 particularly due to elevated environmental risks stemming from the start of the hurricane season.

(Source: Fitch Solutions)