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.
