'Without federal aid, Guam’s economy could have contracted by nearly 50%'

UOG report: Covid crisis highlights the pros and cons of Guam's current political status



Report: Tourism, Guam’s main economic driver, is estimated to have dipped 76 percent, resulting in a loss of local income and spending of $1.38 billion.


Guam’s Covid-year economy is estimated to have contracted between 0.7 percent and 18.9 percent, according to the School of Business and Public Administration’s assessment of the island’s tourism-dependent economy that was propped up by federal aid in 2020.


Without relief from the U.S. government, the contraction could be as much as 49 percent, according to the “2020 Guam Economic Report” released today by University of Guam economics professor, Dr. Maria Claret Ruane, who led the study team comprising students.


The report notes that the pandemic has been a “wake-up call” for the island to reduce its reliance on tourism and underscores the need to diversify the island’s economy. At the same time, the pandemic has played up the advantages and disadvantages of Guam’s relationship with the United States.


Tourism, Guam’s main economic driver, is estimated to have dipped 76 percent, resulting in a loss of local income and spending of $1.38 billion, the report said.


“The $1.38 billion loss from tourism was more than offset by the $1.6 billion Guam received in various forms of federal assistance through the CARES Act,” the report said.


Guam’s economy would have declined 42 percent to 49 percent had it not received any federal relief, the report said.


“If this were any indication of what was lacking in past visions to diversify our economy, then the opportunity is here to address that problem,” the report said.


The authors, however, were unable to make an economic projection for 2021 and to make a forecast on a timeframe for recovery due to the

absence of actual data for 2019 and 2020.

The decline in Guam’s economy compared to 2019 is based on the following factors:


· The authors calculated the unemployment rate to be 19.8 percent using one approach and 26.6 percent using another. This supplements an official unemployment rate released by Guam’s Bureau of Labor Statistics for June 2020 of 17.3 percent.


· The authors calculated that household spending decreased between 30 percent and 50 percent, while business spending decreased 50 percent to 70 percent in the absence of federal assistance.

Guam’s political identity in relation to the federal government is among the highlights of the report, which noted the pros and cons of being an unincorporated territory.


While neighboring island nations quickly walled up their borders at the onset of the Covid-19 pandemic, Guam was unable to take such an action because it lacks authority to shut down the airport. Such a decision falls within the Federal Aviation Administration’s authority.


On the other hand, the report noted that the stream of federal dollars that alleviated the impact of the Covid crisis underscored the benefits of Guam’s current relationship with the U.S.


“The Covid-19 pandemic of 2020 is not just a health crisis. It is an economic crisis and a crisis in self-identity,” Ruane said.


“Although the relationship with the U.S. may have limited the island in its response efforts toward Covid-19, Guam received funding and aid from the federal government, which mitigated the economic impact. All factors must be considered when discussing self-determination.”


Circumstances surrounding the pandemic provided more perspectives for Guam’s recurring discussions on self-determination.

“Although the decision on this issue should not be guided solely by monetary and material benefits, it must consider all factors involved and consequences anticipated, including the loss of federal funding amounting to 33 percent of our economy during good, pre-pandemic times, and 76 percent of our economy during this pandemic,” the report said.


In the yet-to-be scheduled self-determination plebiscite, voters would be asked to choose among three options: statehoods, free association and independence.


"One thing is clear," the report states. "An independent Guam characterized by a weak tourism industry and a lack of new local industries to diversify our current economic structure would force us to have to learn to live with much less material security and opportunities than our current relationship with the U.S. affords us, even or more so during this pandemic."



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