DOD's investments in Guam reach $3.9B

GAO report: The territory is now a $6.7 billion economy, but public debt accounts for 38% of GDP

By Mar-Vic Cagurangan

Guam is now a $6.7 billion economy, thanks to the Department of Defense's investments, which have reached $3.9 billion as of this year.

However, its outstanding public debt has increased to $2.6 billion, accounting for 38 percent of its gross domestic product, according to the Government Accountability Office.

“In real terms, this represented economic growth of about 4 percent from the previous year,” GAO said. “GDP on average declined 0.6 percent annually between fiscal years 2018 and 2022 and increased 1 percent annually between fiscal years 2013 and 2017.

GAO pointed out that Guam's ability to repay debt and access capital markets depends the the strength of its economy.

GAO noted that while Guam’s tourism industry has not returned to pre-pandemic levels, the U.S. military investment bolsters the island’s economy.

“The U.S. military’s growing presence on the territory provides a stable and increasing source of economic activity. Guam’s location enables it to serve as a strategic hub supporting crucial operations and logistics for U.S. military forces operating in the Indo-Pacific region,” states the GAO report released June 30.

From 2020 to 2025, the Department of Defense has invested a total of $3.9 billion for military construction and family housing on Guam.

“This is in addition to the $1.3 billion it used from appropriations for the same purposes for fiscal years 2014 through 2019,” GAO said.

The military’s presence in Guam is expected to expand in the coming years. Guam is expecting that the new Marine Corps Base Camp Blaz, which opened in January 2023, will be home to approximately 5,000 Marines.

Along with Tourism, it is one of Guam’s main economic drivers, primary industries, along with military-related activities and construction.

Due to visitor growth, Guam’s hotel tax revenue has increased from its pandemic low.

The report noted that Guam collected $29 million in hotel tax revenues in fiscal year 2023, representing a 130 percent increase from the low of $12 million in fiscal year 2021.

However, the fiscal year 2023 hotel tax revenues were still 36 percent lower than those collected in fiscal year 2019, prior to the pandemic, reflecting that the tourism industry has not fully recovered, GAO said.

Tourism remains well below pre-pandemic levels, but visitor arrival numbers have continued to increase annually after reaching a low in 2021.

While it may have a relatively stable GDP, Guam faces several additional risks, GAO said, citing Moody’s January 2024 rating action, which noted the island’s “small and concentrated economy” that is heavily reliant on tourism and the residents’ low incomes.

Moody’s also identified Guam’s “very high long-term government liabilities” as a risk factor.

The government of Guam relies on federal dollars and programs.

“While Guam has made some progress in this area by implementing a new financial management system, it has struggled to remediate several material weaknesses in internal control over financial reporting and compliance identified by its independent auditors,” GAO said.

In fiscal 2023, such weaknesses resulted in $15.5 million in questioned costs associated with its federal awards.

“Auditors reported that Guam has not performed timely reconciliations, properly recorded certain revenue and expense transactions, completed a comprehensive physical inventory count, consistently provided appropriate supporting documentation, or effectively monitored compliance with all program requirements,” GAO said.

“Guam implemented a new financial management system in February 2024, according to officials. The system handles the government of Guam’s financial reporting, as well as other functions such as budget, payroll, human resource, and grants management. Guam’s auditors said they anticipate the system will greatly improve financial reporting.”

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