(Bloomberg) — The coronavirus pandemic could cut Puerto Rico’s tax revenue by as much as $2 billion in fiscal year 2020, the commonwealth’s federal oversight board said Wednesday, the latest setback for efforts to restructure the commonwealth’s debt.
Natalie Jaresko, the board’s executive director, said the estimate reflects a projected $20 billion drop in economic activity on the island, which is working its way through a bankruptcy restructuring after amassing some $120 billion in debt and pension obligations.
The oversight board — created by the U.S. Congress to help right Puerto Rico’s finances — is scheduled to approve a new fiscal plan by month’s end. For the first time, Jaresko said the plan would include a set of worst-case scenario projections, reflecting the added uncertainty Puerto Rico is facing.
“It will not be perfect, because I don’t have a crystal ball,” Jaresko said in an interview Wednesday.
Puerto Rico, a U.S. territory of 3.2 million people, took some of the most dramatic steps of any U.S. jurisdiction to try to stop the spread of the virus, barring cruise ships, closing regional airports and shutting all non-essential businesses on March 16. While manufacturing, construction and some professional service companies have been allowed to reopen with restrictions, much of the economy remains paralyzed.
Jaresko praised the local government for taking decisive action but said it has come at a cost.
“The states that have been successful in shutting down and containing have a harder time defining how you restart” the economy, she said. “And that’s really the challenge that lies ahead for Puerto Rico.”
She said she expects Puerto Rico to get about $10 billion through the federal CARES Act and other pandemic aid, but she said she is still worried how the economy would perform going forward.
In particular, it’s unclear what will happen to the tourism and leisure sectors, which represent about 6.5% of the island’s gross domestic product, according to government figures.
“Nobody knows what’s going to happen to the cruise industry,” she said. “Nobody knows when Americans and others are going to feel comfortable getting on an airplane again.”