A report issued Monday by the federal Bureau of Economic Analysis shows that the economy of the U.S. Virgin Islands was growing, showing an increase in gross domestic product, in 2010 – two years before the closure of the Hovensa refinery changed everything.
The report casts a sharp focus on how big a part Hovensa played in the local economy, accounting for the major share of the territory’s trade balance.
Brian Moyer, deputy director of the bureau, was on St. Thomas with two colleagues Monday to discuss the report with government officials. Moyer took time out to talk to reporters.
"These statistics are a bit dated," he said. "One of the things we are working on … is to try to accelerate the release of the statistics by a year."
Moyer said the bureau hopes to have the statistics for both 2011 and 2012 in spring 2013 for a more current picture.
The report opens, saying: "After declining for two years, the economy of the U.S. Virgin Islands grew in 2010. The estimates for the U.S. Virgin Islands show that real GDP … increased 2.9 percent. For comparison, real GDP for the U.S. (excluding the territories) increased 2.4 percent in 2010."
The biggest factor in the increased gross domestic product for 2010 was Hovensa, according to the report.
In 2010, the Virgin Islands imported about $12.3 billion worth of goods and exported a little more than $12.9 billion. The difference of $659 million was the single biggest factor in the territory’s improved GDP. And most of those imports and exports were Hovensa, Moyer said.
"The trade balance contributed significantly to economic growth in 2010 as imports of goods declined more rapidly than exports of goods," the report notes. "As in previous years, the oil refining industry continued to play a major role in the economy, accounting for the vast majority of imports and exports of goods."
Moyer pointed out the impact of Hovensa over the years has been both up and down.
"The petroleum industry, over time, is so volatile. Sometimes it’s made very positive contributions to GDP and sometimes it’s very negative," he said.
In 2009, the balance of trade was only $185 million, and in 2008 it was $318 million. But the year before that, the islands in general and Hovensa in particular had a positive trade balance of $1,636 million, Moyer pointed out.
According to the statistician, Hovensa imported less oil in 2010 than it had in recent years, but increased export by drawing down reserves built up earlier, which increased the overall trade balance in the territory’s favor.
Goods-producing industries in the territory contributed $330 million in compensation to employees, according to the report. Again, that was primarily Hovensa, Moyer said.
This year’s GDP report expands the statistics available to the territory’s economic planners, including the information on compensation by industry and more detailed measures of consumer spending.
In 2010, Virgin Islanders spent more on services, contributing to the increase in overall consumer spending. Within services, health care and a catch-all category of "other" – which includes communication equipment such as cell phones, Internet, recreation services, hair and skin care, and financial and real estate services – were the two biggest contributors to the increase. Spending on goods, particularly durable goods, decreased.
Islanders traveling abroad spent less than nonresidents visiting the islands, giving foreign travel a bump in its contribution to the overall economy.
Moyer pointed to one other area that had a big impact on the 2010 gross domestic product – construction, both government and private. Private investment includes Diageo’s Captain Morgan’s distillery and work on the expansion of Cruzan Rum. Government construction spending included federal funds to repave roads in the V.I. National Park on St. John and construction of the National Guard training facility on St. Croix. Construction spending by the territorial government was largely associated with road and highway construction.
