Guam – The coming distribution of $93 million dollars of tax refunds and yesterday’s 25 cent drop in gas prices are both good news for Guam’s economy. PNC spoke to Department of Labor economist Gary Hiles.
In the next few days over 34 thousand island residents will receive their tax refund for 2011. A total of $93 million dollars will be immediately pumped into the island’s economy. “That’s a large amount of money in comparison to the GovGuam payroll which is roughly ten million dollars bi-weekly that’s roughly eight or nine times the bi-weekly payroll so that’s gonna be a significant disbursement all at once,” said Hiles.
The Guam Department of Labor economist says he has some statistics from the last time that GovGuam payed out tax refunds just a few months ago in December. Although GovGuam payed out about $200 million in December it can give an idea of the type of impact this $93 million dollar payout will have on the local economy. “If the similar trends hold we would expect an increse in sales in the neighborhood of about eight percent total sales on the island within a month,” explained Hiles. The local economist says that this will be a noticeable boom for the economy but one that will be short lived. Most of the spending will happen in the first two months. “I think in the short run it’s gonna be a big boost in the month or two following the refund and it seems that effect wears out pretty quickly,” said Hiles.
This isn’t the only good news for Guam’s economy. Gas prices dropped a whopping 25 cents per gallon down to $4.53 cents per gallon of regular gasoline yesterday. It’s actually a nearly 50 cent decrease from the high point of $4.98 earlier this year or a ten percent decline since the high point. “That will result in consumers being able to shift the money they have available to spend from gasoline purchases to purchases of other things so what we see with the gas going up is that the consumers probably spent about the same amount but after having to spend it on gas they had less money available to spend it on other discretionary items,” explained Hiles. Being able to spend more money on other items should help the local economy because most of the money spent on fuel goes off-island to the major oil companies.
So how long will this drop in gas prices last? Well, it’s really hard to predict because there are so many variables. However, if the demand for fuel remains low due to weak worldwide economies and if the supply remains uninterrupted, fuel prices should stay down. “I don’t think we can anticipate any major booms in the world’s economies usually it’s like a ship that takes a while for the economies to turn around so I would expect the demand worldwide to remain a little bit weak so the other side is the supply side and you just never know when some political issue might cause a threat of a supply disruption so that’s more of an unknown,” said Hiles. However he says that even just the fear of the possibility of an interruption in the supply of oil results in speculation on Wall Street which in turn results in the increase of fuel prices.