Economist speculates on events' impacts on Guam's stability
Guam - The island's economic outlook may be stable, but several events happening worldwide could ultimately change that.
Speaking before the Rotary Club of Tumon Bay today, Bank of Guam chief economist Joseph Bradley says we should keep a close eye on what's happening worldwide including our island's biggest tourist market. Bradley says the expansionary, fiscal and monetary policy in Japan has driven the value of the yen way down against the dollar. He explained, "It's fallen about 25% in just the last year, that makes dollar denominated goods look very expensive to tourists, and so not only are we getting fewer Japanese tourists coming in, those that do come spend less per capita."
He says visitor arrivals from Korea have since propped up the drop off in Japanese arrivals. However, it's not all in the clear as Korea's economy has gone flat recently. "And that may have an impact on how much we can rely on Korea to replace the Japanese tourists that come in," he stated.
Along with what's happening internationally, Bradley says a massive expansionary and monetary policy in the U.S. could also impact Guam's economy. He says despite the best efforts of the Federal Reserve to hold interest rates down, they are starting to rise again. "The way that will affect Guam is if most mortgage interest rates are tied to the ten-year treasury so mortgage interest rates have been rising, and as that happens, it affects our home building industry as well as the affordability of houses for people," said Bradley.
He adds sequestration in the last year has been harmful to the overall economy and that the recent federal government shutdown didn't help matters. But what about here at home? Bradley says the payment of tax refunds, salary increases to some GovGuam employees, and the issuance of bonds for infrastructure purposes for example are all positive strides, but alas we're as stable as we're going to get.
"But we've been stable for much too long at a rate of growth that is not strong enough to really boost the levels of incomes of people and makes people's standards of living better," he said.
Bradley meanwhile recommends just as GVB did after the Japan earthquake two years ago, to redirect its marketing expenditures to different markets that are performing better economically. GVB's figures for the first two weeks of November show a 0.2% decrease compared to last year with Japan arrivals down and Korea, China and Russia numbers up.