Economic Activity Index (“GDB-EAI”)

July 2017

When it is annualized, the level of the EAI is highly correlated with the level of real GNP (with a Pearson correlation coefficient of 0.9760, for FY1981-FY2016).

Annual growth rates of both variables are also highly correlated (with a Pearson correlation coefficient of 0.9547, for FY1982-FY2016).

Nevertheless, the annual growth rate of the EAI IS NOT the same as the annual growth rate of real GNP. Being highly correlated does not mean being equal.

In order to approximate real GNP growth from EAI annual growth, we estimate a linear regression model relating both variables.

Plugging in EAI annual growth rates into the resulting equation, we obtain estimates for the annual growth rates of real GNP, which approximate real GNP annual growth figures published by the Planning Board.

2

The GDB-EAI is an indicator of general economic activity, not a direct measurement of real GNP. The annual growth rate of the EAI is not the same as the annual growth rate of real GNP.

About the interpretation of the GDB-EAI

About the interpretation of the GDB-EAI (2)

3

The GDB-EAI is an indicator of the general economic activity, not a direct measurement of real GNP. The annual growth rate of the EAI is not the same as the annual growth rate of real GNP.

• However, real GNP growth estimates based on the EAI arerelatively close (although not identical) to actual real GNPgrowth figures.

• Real GNP growth for FY2016 was estimated at -0.5% using aregression equation with the growth of the EAI as theindependent variable, while the Planning Board reported adecline of 1.1%. The index’s annual growth is calculated asthe annual percentage change of the twelve-month average.

• On average, the index-based estimates for real GNP growthwere close to the current estimates of the Planning Board.

Fiscal

Year

GDB-EAI

annual

growth

Real GNP

annual

growth

estimated

using the GDB-

EAI

Current

real GNP

annual

growth

2003 1.6% 1.8% 2.1%

2004 2.3% 2.3% 2.7%

2005 1.4% 1.6% 1.9%

2006 0.1% 0.7% 0.5%

2007 -1.5% -0.6% -1.2%

2008 -2.3% -1.3% -2.9%

2009 -4.2% -2.7% -3.8%

2010 -4.9% -3.2% -3.6%

2011 -2.8% -1.6% -1.7%

2012 0.0% 0.6% 0.5%

2013 -0.1% 0.5% -0.1%

2014 -3.4% -2.1% -1.8%

2015 -1.8% -0.8% -0.7%

2016 -1.4% -0.5% -1.1%

4

The graph compares actual real GNP growth rates with projected real GNP growth rates based on the GDB-EAI.

3.0%

1.5%

-0.3%

2.1%

2.7%

1.9%

0.5%

-1.2%

-2.9%

-3.8%-3.6%

-1.7%

0.5%

-0.1%

-1.8%

-0.7%-1.1%

1.9%

1.1%

-0.1%

1.8%2.3%

1.6%

0.7%

-0.6%

-1.3%

-2.7%-3.2%

-1.6%

0.6% 0.5%

-2.1%

-0.8%-0.5%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Pe

rce

nt

chan

ge(y

-oy)

Annual Growth Rate Comparisons:Real GNP, and real GNP estimated with the GDB-EAI

Real GNP annual growth rate Real GNP annual growth rate estimated with the GDB-EAI

Real GNP data source: Puerto Rico Planning Board

About the interpretation of the GDB-EAI (3)

The July 2017 figure for the EAI was 121.0, a 2.1% reduction compared to July 2016, and a decrease of 0.1% compared to June 2017. On a year-to-date basis (July 2017 to July 2017) the decline was 2.1% with respect to the same period of the previous fiscal year.

Total non-farm payroll employment for July 2017 averaged 871,300, an annual decrease of 0.6%.

Electric power generation for July 2017 totaled 1,794.2 million kWh, an annual decrease of 1.5%.

The preliminary number for gasoline consumption* in July 2017 was 76.2 million gallons, or 6.1% below July 2016.

Cement sales for July 2017 totaled 0.9 million bags, registering an annual decrease of 0.5%.

5

In July 2017, the GDB-EAI registered a reduction of 2.1% y-o-y, and a decline of 0.1% in a m-o-m basis.

* The monthly gasoline consumption is estimated by the GDB from the Treasury Department's monthly gasoline excise tax collections paid by importers which are transferred to P.R. Highways and Transportation Authority. These collections fluctuate due to changes in inventories and purchases, which do not necessarily reflect the actual monthly consumption reported by retailers.

Overview – July 2017

6

In July 2017, the GDB-EAI registered a 2.1% y-o-y reduction, and a 0.1% decrease on a m-o-m basis.

13

6.3

13

6.1

13

6.2

13

6.2

13

5.9

13

4.7

13

4.3

13

4.2

13

4.2

13

4.3

13

3.8

13

3.2

13

2.9

13

2.9

13

2.9

13

2.8

13

2.5

13

2.3

13

2.0

13

1.4

13

1.8

13

2.4

13

3.5

13

4.0

13

4.2

13

4.3

13

4.1

13

4.2

13

4.1

13

4.6

13

4.5

13

4.5

13

4.8

13

4.9

13

5.1

13

4.3

13

3.6

13

2.8

13

2.1

13

1.8

13

1.2

13

0.4

12

9.7

12

9.6

12

9.9

12

9.9

12

9.5

12

8.7

12

8.4

12

8.1

12

8.3

12

7.9

12

7.6

12

7.3

12

7.0

12

6.7

12

6.3

12

6.2

12

6.3

12

6.5

12

6.5

12

6.6

12

6.6

12

6.4

12

6.3

12

6.1

12

6.0

12

5.5

12

5.3

12

5.1

12

5.0

12

5.0

12

4.8

12

4.6

12

4.1

12

3.9

12

3.7

12

3.7

12

3.5

12

3.4

12

3.1

12

2.6

12

1.8

12

2.0

12

1.7

12

2.4

12

1.9

12

2.2

12

1.7

12

1.1

12

1.0

-5.6

%-5

.2% -4

.3%

-3.8

%-3

.6%

-4.2

%-4

.1%

-3.8

% -3.2

% -2.6

%-2

.6%

-3.0

%-2

.5%

-2.4

%-2

.4%

-2.5

%-2

.5% -1

.8%

-1.7

%-2

.0%

-1.8

%-1

.5%

-0.2

%0.

6% 1.0%

1.1%

0.9% 1.0% 1.

2% 1.7

%1.

8% 2.3

%2

.3%

1.9

%1.

1%0.

2%-0

.5%

-1.1

%-1

.5%

-1.8

%-2

.2%

-3.1

%-3

.5%

-3.6

%-3

.6%

-3.7

%-4

.1%

-4.1

%-3

.9%

-3.6

% -2.9

%-2

.9%

-2.7

%-2

.4%

-2.1

%-2

.2%

-2.8

%-2

.8%

-2.5

% -1.7

%-1

.5%

-1.1

%-1

.3%

-1.2

%-1

.0%

-0.9

%-0

.8%

-1.0

%-0

.8%

-0.9

%-1

.0%

-1.2

%-1

.4%

-1.6

%-2

.0%

-2.0

%-2

.1%

-1.9

%-2

.0%

-1.7

%-1

.8%

-2.0

%-2

.6%

-2.4

%-2

.4% -1

.8%

-1.8

%-1

.4%

-1.6

%-2

.1%

-2.1

%

-0.6

%-0

.2%

0.1

%0

.0%

-0.3

%-0

.9% -0.3

%-0

.1%

0.0

%0

.1%

-0.4

%-0

.5%

-0.2

%0

.0%

0.0

%-0

.1%

-0.2

%-0

.1%

-0.2

%-0

.5% 0

.3%

0.5

% 0.9

%0

.3%

0.2

%0

.1%

-0.1

%0

.0%

0.0

% 0.3

%-0

.1%

0.0

%0

.2%

0.1

%0

.1%

-0.6

%-0

.5%

-0.6

%-0

.5%

-0.3

%-0

.4%

-0.6

%-0

.5%

-0.1

%0

.2%

0.0

%-0

.3%

-0.6

%-0

.2%

-0.3

%0

.2%

-0.3

%-0

.3%

-0.2

%-0

.2%

-0.2

%-0

.4%

0.0

%0

.0%

0.2

%-0

.1%

0.1

%0.

0%

-0.1

%-0

.1%

-0.2

%-0

.1%

-0.4

%-0

.2%

-0.2

%0.

0%

0.0

%-0

.2%

-0.1

%-0

.4%

-0.2

%-0

.2%

0.0

%-0

.1%

-0.1

%-0

.2%

-0.4

%-0

.6% 0

.2%

-0.2

% 0.6

%-0

.4% 0.2

%-0

.4%

-0.5

%-0

.1%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

100

105

110

115

120

125

130

135

140

Jan

-10

Ap

r-1

0

Jul-

10

Oct

-10

Jan

-11

Ap

r-1

1

Jul-

11

Oct

-11

Jan

-12

Ap

r-1

2

Jul-

12

Oct

-12

Jan

-13

Ap

r-1

3

Jul-

13

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

Ap

r-1

7

Jul-

17

Ind

ex(J

anu

ary

19

80

= 1

00

)

GDB Economic Activity Index

Value (LHS) Year-over-year percent change (RHS) Month-over-month percent change (RHS)

7

The complete series of the new EAI, which starts in January 1980, shows the recessions of FY1982 and FY1983, the mild recession of FY1991, and the recession of 2001. It also shows the downward path of the Index since the beginning of the current recession.

80

90

100

110

120

130

140

150

160

Jan

-80

Jan

-81

Jan

-82

Jan

-83

Jan

-84

Jan

-85

Jan

-86

Jan

-87

Jan

-88

Jan

-89

Jan

-90

Jan

-91

Jan

-92

Jan

-93

Jan

-94

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

Jan

-16

Jan

-17

Ind

ex

(Jan

uar

y1

98

0 =

10

0)

GDB Economic Activity Index

8

GDB Economic Activity Index: Data for the past decadePUERTO RICO ECONOMIC INDICATORS GOVERNMENT DEVELOPMENT BANK

GDB Economic Activity Index Economic Analysis Division

(January 1980 = 100)

FISCAL YEAR * 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

JULY 147.8 140.1 134.3 132.0 134.5 129.7 127.0 126.0 123.5 121.0

AUGUST 147.5 139.5 134.2 131.4 134.5 129.6 126.7 125.5 123.4

SEPTEMBER 146.3 138.7 134.2 131.8 134.8 129.9 126.2 125.3 123.1

OCTOBER 145.6 137.9 134.3 132.4 134.9 129.9 126.2 125.1 122.6

NOVEMBER 144.8 137.4 133.8 133.5 135.1 129.5 126.3 125.0 121.8

DECEMBER 144.9 137.2 133.1 134.0 134.2 128.7 126.5 125.0 122.0

JANUARY 144.4 136.3 132.8 134.2 133.6 128.4 126.5 124.8 121.7

FEBRUARY 143.5 136.1 132.9 134.3 132.8 128.1 126.6 124.6 122.4

MARCH 142.3 136.2 132.9 134.1 132.1 128.3 126.6 124.1 121.9

APRIL 141.7 136.2 132.8 134.2 131.8 127.9 126.4 123.9 122.2

MAY 140.9 135.9 132.5 134.1 131.2 127.6 126.3 123.7 121.7

JUNE 140.6 134.7 132.3 134.6 130.4 127.3 126.1 123.7 121.1

FISCAL YEAR * 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

JULY -3.5 -5.2 -4.1 -1.7 1.8 -3.5 -2.1 -0.8 -2.0 -2.1

AUGUST -3.3 -5.4 -3.8 -2.0 2.3 -3.6 -2.2 -1.0 -1.7

SEPTEMBER -3.8 -5.2 -3.2 -1.8 2.3 -3.6 -2.8 -0.8 -1.8

OCTOBER -3.6 -5.3 -2.6 -1.5 1.9 -3.7 -2.8 -0.9 -2.0

NOVEMBER -4.0 -5.1 -2.6 -0.2 1.1 -4.1 -2.5 -1.0 -2.6

DECEMBER -3.5 -5.3 -3.0 0.6 0.2 -4.1 -1.7 -1.2 -2.4

JANUARY -3.8 -5.6 -2.5 1.0 -0.5 -3.9 -1.5 -1.4 -2.4

FEBRUARY -4.1 -5.2 -2.4 1.1 -1.1 -3.6 -1.1 -1.6 -1.8

MARCH -4.9 -4.3 -2.4 0.9 -1.5 -2.9 -1.3 -2.0 -1.8

APRIL -5.0 -3.8 -2.5 1.0 -1.8 -2.9 -1.2 -2.0 -1.4

MAY -5.3 -3.6 -2.5 1.2 -2.2 -2.7 -1.0 -2.1 -1.6

JUNE -5.2 -4.2 -1.8 1.7 -3.1 -2.4 -0.9 -1.9 -2.1

FISCAL YEAR * 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

JULY -5.3 -7.7 -5.8 -2.2 2.4 -4.8 -2.7 -1.0 -2.5 -2.6

AUGUST -5.0 -8.0 -5.3 -2.7 3.1 -4.9 -2.9 -1.2 -2.1

SEPTEMBER -5.7 -7.6 -4.5 -2.5 3.0 -4.9 -3.6 -1.0 -2.2

OCTOBER -5.5 -7.8 -3.5 -2.0 2.5 -5.0 -3.7 -1.2 -2.5

NOVEMBER -6.0 -7.4 -3.6 -0.3 1.5 -5.5 -3.3 -1.2 -3.2

DECEMBER -5.3 -7.7 -4.1 0.8 0.3 -5.5 -2.2 -1.5 -3.0

JANUARY -5.6 -8.1 -3.5 1.4 -0.6 -5.1 -2.0 -1.7 -3.0

FEBRUARY -6.2 -7.4 -3.2 1.4 -1.5 -4.8 -1.4 -2.0 -2.2

MARCH -7.3 -6.1 -3.2 1.2 -2.0 -3.9 -1.7 -2.5 -2.2

APRIL -7.5 -5.4 -3.4 1.3 -2.4 -3.8 -1.5 -2.5 -1.7

MAY -7.9 -5.0 -3.4 1.7 -3.0 -3.6 -1.3 -2.6 -2.0

JUNE -7.7 -5.9 -2.4 2.3 -4.2 -3.1 -1.2 -2.4 -2.6

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

FISCAL YEAR *

AVERAGE 144.2 137.2 133.4 133.4 133.3 128.7 126.5 124.7 122.3

DIFFERENCE -6.3 -7.0 -3.8 0.0 -0.1 -4.6 -2.3 -1.7 -2.4

% CHANGE -4.2 -4.9 -2.8 0.0 -0.1 -3.4 -1.8 -1.4 -1.9

JUL-JUL

AVERAGE 147.8 140.1 134.3 132.0 134.5 129.7 127.0 126.0 123.5 121.0

DIFFERENCE -5.3 -7.7 -5.8 -2.2 2.4 -4.8 -2.7 -1.0 -2.5 -2.6

% CHANGE -3.5 -5.2 -4.1 -1.7 1.8 -3.5 -2.1 -0.8 -2.0 -2.1

CALENDAR YEAR

AVERAGE 140.3 134.9 132.6 134.5 130.8 127.2 125.9 123.4

DIFFERENCE -7.4 -5.4 -2.3 1.8 -3.7 -3.6 -1.4 -2.4

% CHANGE -5.0 -3.8 -1.7 1.4 -2.7 -2.7 -1.1 -1.9

JAN-JUL

AVERAGE 141.9 135.7 132.6 134.3 131.7 127.8 126.4 124.0 121.7

DIFFERENCE -7.1 -6.3 -3.0 1.7 -2.6 -3.9 -1.4 -2.3 -2.3

% CHANGE -4.8 -4.4 -2.2 1.3 -2.0 -2.9 -1.1 -1.8 -1.9

* Runs from July of the previous year to June current year.

Variable: EAIBGF_TS

• Source: Government Development Bank for Puerto Rico

Go to Index

YEAR OVER YEAR PERCENTAGE CHANGE

YEAR OVER YEAR DIFFERENCE

SUMMARY DATA

9

Total non-farm payroll employment for July 2017 averaged 871,300, an annual decrease of 0.6%.

Sources: BLS and PREPA

* Not seasonally adjusted.

GDB Economic Activity Index Components

Total Non-Farm Payroll Employment*(Thousands of jobs)

820

840

860

880

900

920

940

960

980

Jan-1

3

Jul-

13

Jan-1

4

Jul-

14

Jan-1

5

Jul-

15

Jan-1

6

Jul-

16

Jan-1

7

Jul-

17

Electric power generation for July 2017 averaged 1,794.2 million kWh, an annual reduction of 1.5%.

Electric Power Generation*(Millions of kWh)

0

500

1,000

1,500

2,000

2,500

Jan-1

3

Jul-

13

Jan-1

4

Jul-

14

Jan-1

5

Jul-

15

Jan-1

6

Jul-

16

Jan-1

7

Jul-

17

10

Sources: PRHTA and GDB

* Not seasonally adjusted.

Cement Sales for July 2017 totaled 0.9 million bags, an annual decrease of 0.5%.

GDB Economic Activity Index Components

Cement Sales*(Cement bags sold, in thousands)

700

900

1,100

1,300

1,500

1,700

1,900

Jan-1

3

Jul-

13

Jan-1

4

Jul-

14

Jan-1

5

Jul-

15

Jan-1

6

Jul-

16

Jan-1

7

Jul-

17

The preliminary estimate of gasoline consumption for July 2017 was 76.2 million gallons, for an annual increase of 6.1%.

Gasoline Consumption*(Millions of gallons)

0

20

40

60

80

100

120

Jan-1

3

Jul-

13

Jan-1

4

Jul-

14

Jan-1

5

Jul-

15

Jan-1

6

Jul-

16

Jan-1

7

Jul-

17

*The monthly gasoline consumption is estimated by the GDB from the Treasury Department's monthly gasoline excise tax collections paid by importers which are transferred to P.R. Highways and Transportation Authority.

11

Description of the

GDB-Economic Activity Index

12

Advantages of the GDB-EAI:

Readily available

Highly correlated to Puerto Rico’s real GNP

Reliable tool to monitor actual trend of Puerto Rico’s economy

The GDB-EAI is made up of 4 indicators:

Total Payroll Employment (Establishment Survey/ Thousands of employees)

Total Electric Power Generation (Millions of kWh)

Cement Sales (Millions of bags)

Gas Consumption (Millions of gallons)

GDB-EAI Highlights and Composition

GDB Economic Activity Index Highlights

13

The GDB-EAI is a coincident index for the economic activity of Puerto Rico. It is highly correlated to PuertoRico’s real GNP in both, levels and annual growth rates.

This index’s methodology is similar to that used in The Conference Board’s coincident index of the USeconomy. This methodology follows a standard procedure to adjust the data for seasonality and volatilityfactors.

Description of the GDB-EAI

Relationship on the levels: FY1981-FY2016y = 49.588x – 467.8 R² = 0.9526

Real Gross National Product as a function of the GDB Economic Activity Index

Relationship on the growth rates: FY1982-FY2016

y = 0.7836x + 0.0056 R² = 0.9114

Sources: GDB

3,000

4,000

5,000

6,000

7,000

8,000

80

90

100

110

120

130

140

150

160

GN

P54

(Million o

f dollars

at

1954 p

rices)

GDB-EAI(January 1980=100)

-6%

-4%

-2%

0%

2%

4%

6%

-6% -4% -2% 0% 2% 4% 6%

GN

P54 A

nnual

Gro

wth

GDB-EAI annual growth

14

The GDB-EAI and its indicators are subject to revisions. Whilethe information comprising the GDB EAI has been obtainedfrom sources GDB believes to be reliable, GDB is notresponsible for any errors or omissions, or for the resultsobtained from the use of this information.

Disclaimer