Francisco Montalvo Fiol, an economic analyst, professor and management advisor, warned that Puerto Rico faces a risk of stagflation by 2027, a condition in which economic contraction combines with inflation. He pointed to the most recent International Monetary Fund (IMF) analysis, which projects a 0.1% contraction in Puerto Rico’s real Gross Domestic Product (GDP) for 2026, while forecasting global growth of 3.1% for 2026, with inflation continuing to rise.
The term stagflation was popularized in 1960 by British politician Iain Macleod. Montalvo Fiol explained that Puerto Rico operates within the US monetary and banking system, which limits its ability to control currency or set interest rates. He said the Fiscal Control Board (JCF) and the Planning Board present divergent scenarios but agree growth will be very limited.
The Planning Board’s official projection, which he described as the most optimistic, anticipates growth of 0.3% in 2026 and 0.02% in 2027. He considers the IMF projection the closest to reality and described a static economy facing relatively high inflation as "the worst of both worlds." He also questioned the official unemployment rate, saying that although low, it does not fully reflect the labor market.
The IMF identifies three main threats: a possible correction in prices of AI-related assets, inflation spikes or fiscal concerns driving sharp rises in sovereign bond yields, and growing cyber threats from financial digitalization. It also warns about excessive debt and liquidity risks, and recommends strengthening financial resilience, improving transparency and limiting excessive leverage.