Home Business Virgin Islands Hit Hard by Recession, GDP Contracts 13% in 2012

Virgin Islands Hit Hard by Recession, GDP Contracts 13% in 2012

When you purchase through our sponsored links, we may earn a commission. By using this website you agree to our T&Cs.

According to data from the Bureau of Economic Analysis, the economy of the three U.S. Virgin Islands is experiencing a severe recession with a 13.2% contraction in GDP for 2012. This comes on top of a decrease of 6.6% in 2011.

Oddly the gigantic contraction can be traced to one singular cause. The island of St. Croix, up until 2012, was home to the Hovensa oil refinery. Due to the Great Recession and subsequent decline in oil demand, the joint venture between Hess and the Venezuelan government was shut down. So large is the economic impact of Hovensa, that “excluding the imports, exports, and inventory investment of the petroleum refining industry, GDP would have increased 2.6 percent in 2012 primarily reflecting growth in exports of rum,” according to BEA.

Not surprisingly, unemployment has also skyrocketed according to Slate. As Matthew Yglesias explains, the islands’ connection to the U.S. economy, currency, and policies have hampered and drawn out a potential recovery.

..the U.S. Virgin Islands is part of the United States and has to ride on macroeconomic stabilization policies that are not designed to help the island adjust to these kind of shocks. That’s great for any islanders who have safe jobs (working for the local government, say) with dollar-denominated salaries but it ensures that the blow of a closing refinery will create mass unemployment and not “just” falling incomes.

Our Editorial Standards

At ValueWalk, we’re committed to providing accurate, research-backed information. Our editors go above and beyond to ensure our content is trustworthy and transparent.

Floating Path
Editor

Want Financial Guidance Sent Straight to You?

  • Pop your email in the box, and you'll receive bi-weekly emails from ValueWalk.
  • We never send spam — only the latest financial news and guides to help you take charge of your financial future.