Feds crunch the numbers on V.I. economy
Published: July 8, 2010
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The driving force behind the V.I. economy is oil, according to a study conducted by the U.S. Commerce Department.
The U.S. Commerce Depart-ment’s Bureau of Economic Analysis released a detailed breakdown of its first Virgin Islands gross domestic product study, which looked at the years 2002 through 2007. The study revealed that petroleum products produced by the HOVENSA oil refinery on St. Croix are more critical than even tourism to the health of the local economy.
“Oil is a big deal,” said Lauritz Mills, director of the V.I. Bureau of Economic Research, which assisted federal economists with the study. “We often think it’s tourism, but it really is oil.”
Carol Moylan, chief of the Bureau of Economic Analysis’ Income and Wealth Division, said in an interview that refined petroleum products accounted for at least 85 percent of the territory’s exports. Rum came in a distant second, accounting for about 5 percent to 10 percent of exports.
In 2007, the Virgin Islands exported $14.5 billion worth of products and had $13.1 billion worth of tourism spending.
That same year, the territory spent $12.5 billion on imports, primarily for food, automobiles and other consumer items and the freight charges to ship them to the territory.
Between 2002 and 2007, the Virgin Islands’ economy grew at an average annual rate of 2.9 percent, slightly faster than the U.S. economy as a whole, which grew 2.8 percent.
The territory’s inflation rate also grew faster than the national average, which Mills said was largely due to increases in the cost of fuel to run the generators that produce the Virgin Islands electricity.
Although costs for consumer good has risen, the territory’s tourism income has not, the Commerce Department’s report shows. Although tourist spending showed healthy growth from 2003 to 2005, it began to decline in 2006. Visitor spending shrank 3.1 percent from 2005 to 2006 and 5.1 percent from 2006 to 2007, according to the report.
“Tourism is on the decline,” Mills said. “We need to reform the product.”
“Perhaps we need to target the people with the bigger bucks,” she added.
The V.I. Bureau of Economic Research has been calculating GDP data for several years. But Mills said that when local government agencies apply for federal funds, they are often asked for Commerce Department figures, which they could not provide in the past.
The GDP calculations were funded by the Interior Department’s Office of Insular Affairs. Wali Osman, regional economist for the office, said the goal of the study was to give the Virgin Islands official GDP data that can be compared to U.S. states and to countries around the world.
“The Bureau of Economic Analysis is the federal government’s authority on national income,” Osman said.
“Political leaders and other leaders in the territories are entitled to just as good of information as the governors of the 50 states,” he added.
The Bureau of Economic Analysis plans to release Virgin Islands GDP figures for 2008 and 2009 in spring 2011, and regular annual estimates are expected to come after that.
