Macroeconomic Forecast Puerto Rico

May saw a 4.7% y-o-y increase in unemployment levels in Puerto Rico, rising to 11.2%, and raising fears that the island is being hit hard from greater foreign competition in the manufacturing sector and an economic downturn in the US. Tourism, which comprises 7% of Puerto Rico's GDP, has also been hit, with a 4.3% y-o-y decrease in tourist occupancy in Q108, a trend which we see continuing in the short term. Nevertheless, we expect to see Puerto Rico experience a moderate economic recovery in 2009, as a drop in energy and commodity prices should help ease pressure on the manufacturing sector.

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