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Report: Guam's economy continues to improve

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As the new fiscal year draws near, Guam's economy continues to improve. That's the assessment of long-time Department  of Labor economist Gary Hiles in his 2016 Economic Outlook Report.

"The economy on Guam has been gradually expanding for the last four years," he summarized, "and we're expecting for 2016 that it will continue expanding and perhaps start accelerating with the beginning of the military buildup, the marine relocation to Guam."

The Record of Decision was signed just this weekend; it was the final step in the defense department's lengthy federal environmental assessment. Hiles says it will trigger a more than decade-long run of military construction projects. He says Department of Defense predicts a gradual rise in activity that will add about 2,000 civilian jobs by 2016, ramping up to a high of more than 7,000 laborers by 2021.

But for the near term, Hiles says it was private sector construction that helped most, noting when asked about what stands out as highlights of his outlook, "Well, in this year the opening of the Regional City medical hospital has been a big highlight, and also the major employer - the Dusit Thani hotel - has opened in Tumon. So two major employers and a number of smaller new restaurants have opened recently. And that employment will continue and expand some more in the future as those businesses get more fully ramped up."

In his report, Hiles says there are a number of other private and local government construction projects in the pipeline, their impact on the level of economic activity and revenues for Fiscal Year 2016 will of course depend on the timing. Hiles says a short term leading indicator of future construction activity is the number of building permits issued, adding, "Building permits are fairly strong. We've seen an increase in the number of permits in commercial which can lead to jobs in the future. There's also a number of bond funded projects, primarily for the utilities. the airport will be doing a number of projects, as will the water and power authorities. So these bond-funded utility projects will play a significant component in the construction work in the years ahead."

Hiles report also discusses how a dramatic drop in fuel prices will have a significant impact here. He said, "Two of the main factors are, on the demand side because china's economy is slowing down a bit. That demand is slowing down. And with the deal with Iran, we'll expect to see more oil coming out of Iran. So the supply has expanded, also the supply of fuel has expanded with the fracking industry in the united states so enormous. the United States has gone to almost being self sufficient in some fuels. 1256  :34

He says as a result of lower fuel prices local consumers will have more money to spend within the community.

Externally, he says it will also provide a stimulus to Asian economies that are net petroleum importers, such as Japan, Korea and China - countries which also happen to be Guam's primary source of tourists. "Surprisingly a deflationary factor is with the reduced price of fuel that we've experienced in the last year, and that's an important factor because our economy depends a lot on fuel. Fuel for vehicles, transportation, that's the consumer expense. But also for the airlines to bring the tourists. When the fuel prices were very high, there was fuel charges added, but now some of those fuel charges are being reduced or eliminated. So that's helpful, encouraging for tourist industry. That makes tourists flights to Guam more affordable," Hiles said.

And speaking of  Guam's main industry, he says estimates call for modest growth in tourism, adding, "The Visitors Bureau put out a forecast of slight increase in tourism for 2016, but kind of hidden in that is the impact of tourism will expand because tourists are spending more.

"Our major source of tourism is Japan and their economy is fairly flat. And so the Japan arrivals are down compared to historical numbers, but we're fortunate that the Korean market has picked up and basically filled in the slack so resulting in a net increase in tourists recently."

But Hiles notes there is one issue- especially in this region- that cannot be predicted, and that's Mother Nature. Case in point: Typhoon Soudelor's devastation in Saipan, of which he said, "There's always the possibility of weather disturbances, typhoons, earthquakes other natural or health issues so, you just never know for sure. It's unpredictable."

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