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Enhancing the economy growth of Puerto Rico

Enhancing the economy growth of Puerto Rico. Calculating the amount of fixed investment needed to boost economic growth. Prepared by José I Alameda Lozada Ph.D. Economist and Professor at the UPR, Mayaguez June 10, 2014 (Revised). Main nominal GNP’s components.

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Enhancing the economy growth of Puerto Rico

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  1. Enhancing the economy growth of Puerto Rico Calculating the amount of fixed investment needed to boost economic growth Prepared by José I Alameda Lozada Ph.D. Economist and Professor at the UPR, Mayaguez June 10, 2014 (Revised)

  2. Main nominal GNP’s components GNP = C + G + I + (X –M) • GNP = Gross National Product, • C = Personal Consumption • G = Government Expenditures • I = Gross Domestic Investment • X= Sales to the rest of the world or Exports • M = Purchases from the rest of the world or Imports

  3. Puerto Rico’s GNP Components, nominal prices

  4. Main assumption of the model • Re-grouping the components: • GNP = (C + G) + (X –M) + I Fixed amount Target Variable growth rate Fixed average growth rate

  5. Main assumptions to forecast GNP 2014-2020 • Assumptions under this model: • Inflation rate = 2% • Fixed average growth rate • Fixed amount

  6. Investment Requirement to enhance economic growth • Target variable = Gross Fixed Investment • I = Change inventories + Gross Fixed Investment • Changes inventories is assumed at 260 millions during 2014-2020. • Gross Fixed Investment is the target. It means construction of tangible plant building, machinery and equipment, and infrastructure.

  7. For an annual real growth rate of 4%

  8. Puerto Rico’s investment requirements TOTAL INVESTMENT NEEDED FOR A 4% REAL GROWTH RATE DURING PERIOD 2014-2020 IS $143,500 MILLIONS

  9. For an annual real growth rate of 5%

  10. For an annual real growth rate of 5% TOTAL INVESTMENT NEEDED FOR A 5% REAL GROWTH RATE DURING PERIOD 2014-2020 IS $169,111 MILLIONS

  11. Scenarios for different real growth rates In order to enhance steady-state economic growth process, the investment requirements in Puerto Rico are really high. Then, local authorities need to re-focus the source of investment or diversify countries portfolio.

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