V.I.'s economy was growing before HOVENSA closed
Published: October 16, 2012
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ST. THOMAS - The territory's economy grew by 2.9 percent in 2010, according to new data released Monday by the federal government.
The growth was largely attributed to HOVENSA, which shut down all refining operations in the territory earlier this year.
The territory's Gross Domestic Product, sometimes referred to locally as the Gross Territorial Product, is the value of goods and services that any economy produces at any given time. To determine the GDP, economists look at many different sectors, such as consumption; imports and exports; taxes; government spending; and corporate and personal income levels.
The U.S. Bureau of Economic Analysis calculates the Gross Domestic Product for the U.S. Virgin Islands, and officials from the agency are in the territory this week to detail the GDP results with government officials and the public.
Brian Moyer, deputy director at the Bureau of Economic Analysis, told The Daily News that after declining for two consecutive years, the territory's GDP increased by 2.9 percent in 2010. By comparison, the national GDP - which does not include data from the U.S. territories - grew by 2.4 percent that year, he said.
The territory's total GDP for 2010 was $4.66 billion, up slightly from $4.53 billion in 2009.
The agency also published some revisions to the 2008 and 2009 GDP data, but the overall numbers were unchanged, he said.
With funding from the Department of Interior, the bureau was able to expand the 2010 data in three areas: breaking down the data to include estimates of GDP by industry; employee compensation by industry; and more detailed consumer spending information.
Moyer said the primary driver of the territory's economic growth was the HOVENSA oil refinery, which in 2010 exported more refined oil than it imported crude oil.
Before the St. Croix refinery shut down earlier this year, HOVENSA would import crude oil at a low cost and export refined oil at a higher price. The difference is considered economic growth for the territory.
Moyer said that in 2010, imports and exports from HOVENSA declined but that the refinery used up existing inventory, which allowed the company to import less than it exported. That caused the territory's GDP to grow in 2010, he said.
The 2.9 percent increase in the GDP for 2010 also reflects increases in the construction categories, including public and private sector projects.
Moyer said major construction projects, such as the new Diageo rum distillery and the expansion to the Cruzan Rum distillery, led to economic growth in 2010, as did federal and local government projects, such as road construction and new government facilities, which included the V.I. National Guard training center.
Tourism continues to falter in the economic downturn, according to the GDP report.
While it is still a large part of the territory's economy, the industry has been trending down or remaining flat for years. The last year the tourism industry showed significant growth was in 2004, when 2 percent growth was recorded in the category. With the exception of a modest 0.8 percent growth in 2005, the tourism industry has showed zero growth or negative numbers each year since, according to the report.
"While tourism was still a drag on the economy in 2010, it was not as much of a drag on the economy as it was in 2009," Moyer said.
Increased spending in health care services and the broad "catch all" category of other services - which includes communications, recreation and personal services - led to a 0.2 percent increase in consumer spending, Moyer said. Spending on goods, particularly durable goods, decreased, according to the report.
"Consumer spending is fairly flat in 2010," he said.
Bringing the GDP current
To bring the GDP data more current, Moyer said the Bureau of Economic Analysis is in discussions with the Department of Interior Office of Insular Affairs to calculate and publish the 2011 and 2012 GDP data in 2013.
"That would be very useful for policy analysis," Moyer said.
In 2008, an agreement was struck between the Department of the Interior's Office of Insular Affairs and the Department of Commerce's Bureau of Economic Analysis to include the U.S. territories in the annual GDP estimates - something that had not been done before.
The first thing the Bureau of Economic Analysis did was compile the territory's data for the years 2002 through 2007. For that time period, the real Gross Domestic Product - which has been adjusted to remove price changes - grew at an average rate of 2.9 percent each year. In 2007, the territory's GDP was $4.8 billion.
When the global recession hit in 2008, the territory's GDP fell to $4.2 billion. The GDP for 2008 declined by 1.3 percent and dropped another 5.6 percent in 2009.
"Going forward, our objective is to formalize the scope of the BEA's mandate to include the territories. This inclusion is critical as island leaders are increasingly asked to do more with less in the face of stringent budget cuts. The goal is to provide data that is current, accessible and employable," Assistant Secretary for Insular Areas Anthony Babauta said in a written statement.
- Contact Aldeth Lewin at 714-9111 or email email@example.com.