From bad to worse

If the Bureau of Economic Analysis’ last report on the CNMI gross domestic product estimates confirmed that the islands’ economy was shrinking, its 2008 and 2009 GDP estimates for the CNMI paint an economy already on the ropes following the demise of its once mighty garment industry.

Tony Babauta, Assistant Secretary for Insular Affairs, accompanied BEA officials in a meeting with acting governor Eloy S. Inos and lawmakers on Capital Hill yesterday, and although what they reported was no surprise to CNMI leaders, the presentation quantified through numbers and statistics the economic suffering the islands have gone through and continue to go through the past several years.

The estimates for the CNMI showed that real GDP—GDP adjusted to remove price changes—decreased 19.8 percent in 2009 to $716 million after decreasing 12.1 percent to $847 million in 2008. GDP represents the total amount of products and services produced in a given eyar.

BEA said 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.

While exports of goods began its steady decline in 2005, BEA said the steepest declines occurred in the surveyed years—2008 and 2009.

BEA also said that decreases in real consumer spending in 2008 and 2009 negatively impacted economic growth, most notably in 2009. That year real consumer spending fell by approximately 13 percent to $518 million after falling by less than 1 percent to $588 million in 2008.

While the last estimates do not give a rosy picture, it nevertheless will help the CNMI design a blueprint to start its economic recovery, Babauta said.

“It begins to paint a picture to leaders of the islands and up on Capitol Hill, so they have the right information and are empowered to make good decisions,” he said.

BEA deputy director Dr. Brian C. Moyer said the Commonwealth economy’s staggering decline could be blamed on its lack of diversity.

“The story here is your economy is so dependent on a few industries. For the mainland, tourism may go down but you have other industries offsetting that so in the aggregate the economy only falls 2.6 percent [in 2009],” he said.

The problem with the CNMI, Moyer said, is it is dependent on only tourism and garment manufacturing, which Inos was quick to point out that the islands now have become a single economy, relying solely on tourism.

Inos said the recent GDP analysis should be a lesson learned for the CNMI “not to put its eggs in one basket” or in this case relying only in two industries.

“With your assistance Mr. Secretary [Babauta], we can all begin to roll our sleeves and use this report to show what we can do and get this moving and turn this thing around. …I don’t want to see these numbers static and we share the same view. We don’t want to see it in dynamic mode and keeps going south. …We’ll make sure the next round of data collection we will be better and more easily accessible,” he said.

Babauta said that CNMI leaders should study the BEA data and revisit the forum for economic and labor development they held earlier in the year to come up with a plan to resuscitate the economy.

“We should realize that what we are looking at here are 2008 and 2009 figures. People in the CNMI have lived through this decline in the economy. These numbers don’t tell the story but it helps quantify the pain that has been felt by the community. I think it also begins to develop a better picture of how and where the business community needs to move forward and in some large measure help in developing a plan,” said Babauta.

To this end, the OIA official promised the help of the agency’s economist, Wally Osman, to help develop an economic plan for the CNMI.

Babauta was joined in the Governor Office and Legislature presentations by Osman, BEA Industry Sector Division chief Nicole M. Mayerhauser and BEA National Income and Wealth Division manager Aya Hamano.

The CNMI’s GDP showed a 4.2 percent average annual decline between 2002 and 2007, according to the first GDP estimates report on the CNMI, released on May 5, 2010.