By Ron Rocky Coloma
Guam’s economic outlook for 2025 is a mix of cautious optimism and challenges.
“Guam's economy will likely continue its overall expansion trend throughout 2025 and beyond,” according to Gary Hiles, chief economist at the Guam Department of Labor. “The three major sources of funds flowing to Guam to propel the economy —tourism, federal defense and federal nondefense expenditures—are all expected to increase simultaneously in 2025.”
Such projection is based on an assumption that regional stability will be maintained. However, the growing geopolitical tensions in the region add an element of unpredictability. “The impact of geopolitical tensions is impossible to predict with any certainty,” Hiles said.
China raised regional anxiety in September when the People's Liberation Army’s Rocket Force launched an intercontinental ballistic missile, carrying a dummy warhead to the high seas in the Pacific Ocean. The communist regime threatens to take over Taiwan in 2027, warning to smash “Taiwan independence” and “foreign interference.”
Washington’s increased engagement in the Pacific island region and recent arms sales to Taiwan further agitated Beijing. Guam is most likely to be dragged into any conflict should the U.S. take action to defend Taiwan.
“Tourism is Guam’s most sensitive component to be adversely affected by geopolitical tensions,” Hiles said.
Tourism, a backbone of the economy, has been rebounding since South Korea and Japan lifted their pandemic restrictions in 2022 and 2023, respectively. But, Hiles said, recovery has been uneven.
“Arrivals from both countries have continued their expansion each year since then,” he said. “However, the pace of recovery has slowed measurably and remains well below pre-pandemic levels.”
The Guam Visitors Bureau projects moderate growth in arrivals for 2025, aided by recovery plans aimed at bolstering tourism.
“September and October 2024 numbers cause concern that the upward trend is weakening,” Hiles said. “Korean arrivals were 10.4 percent lower in September 2024 compared to the previous year. In October, the decline was 9.4 percent.”
Japan, however, has shown modest improvement, with arrivals increasing 15.7 percent in September and 20.9 percent in October year-over-year. To sustain growth, GVB has proposed a short-term tourism recovery plan, aiming to boost arrivals by up to 46 percent in 2025 with targeted interventions.
“Businesses catering to tourists are challenged to reopen or remain in operation for such an extended and indefinite recovery,” Hiles said. Arrivals remain at only 46.2 percent of 2019 levels, with Japan lagging significantly behind South Korea.
The strong U.S. dollar has compounded these challenges. “The strong U.S. dollar relative to the Korean won, particularly the Japanese yen, makes Guam a more expensive destination,” he said.
Guam’s recovery from the pandemic and natural disasters like Typhoon Mawar has been uneven. While many businesses have bounced back, some damage remains visible. “Most of the recovery from Typhoon Mawar occurred relatively quickly,” Hiles said. “An exception is the property damage on and off base. The most visible unrepaired civilian structural damage is the former Verona Hotel.”
While tourism is a volatile industry, Guam still has federal spending to rely on despite the expiration of Covid-recovery grants under the American Rescue Plan Act.
The federal stopgap measure signed by President Joe Biden in December includes more than $4 billion in funding for several Guam projects related to disaster recovery and repairs of infrastructure and facilities damaged by Typhoon Mawar. The continuing resolution under the American Relief Act, 2025, which was signed to avoid a federal shutdown, provides fiscal year 2025 appropriations to federal agencies through March 14, 2025.
Strategic federal expenditures for defense and nondefense sectors are anticipated to play a pivotal role in 2025. Defense-related projects, including those at Marine Corps Base Camp Blaz, continue to inject funds into the local economy.
The first tranche of Marines from Okinawa arrived on Guam in December. The flow of troops will continue in 2025 and in the following years until the relocation of 5,000 Guam-bound Marines is completed.
“Federal expenditures on nondefense programs are also expected to increase,” Hiles said. “Defense spending, including construction, is underway for other services, including the U.S. Navy, the U.S. Air Force and missile defense systems.”
Ernie Galito, chairman of the Board of the Guam Chamber of Commerce, expects defense spending to continue under Donald J. Trump.
“President Trump's emphasis on national security and military expansion suggests that Guam could see an increase in defense-related activities and investments,” Galito writes in an op-ed piece. “This focus would reinforce the island's security and create economic opportunities through job creation and the development of related industries.”
But federal-policy shifts in 2024 could create uncertainties. For example, the expiration of Compact Impact funding creates a gap of more than $14 million, which was the amount Guam received annually in the past 20 years.
The Compact Impact reimbursement program has been replaced by the Compact Impact Fairness Act, which restores federal benefits to migrants from Palau, the Federated States of Micronesia and the Marshall Islands. It is currently unclear how CIFA would play into Guam’s economy.
Galito said Trump's anticipated economic policies present a unique opportunity for Guam to advance its financial and strategic interests.
“President Trump demonstrated a commitment to bolstering rural and territorial economies during his previous term. His administration invested $871 million to improve critical community facilities across 43 states and Guam,” the chamber’s officer said.
He said a Republican majority in the Guam legislature and Republican delegate to Congress expand an opportunity for the territory to strengthen collaboration with the federal
government that would facilitate increased investments.
“Such funding could be pivotal in enhancing Guam's infrastructure, healthcare, and education systems, stimulating economic growth, and improving the quality of life for residents,” Galito said.
Trump is anticipated to implement federal tax reforms, such as cutting the corporate income tax rate from 21 percent to 15 percent for companies producing goods in the U.S. “While the direct impact on Guam's tax structure requires careful analysis, such federal policies could enhance the overall business climate, potentially attracting investment and encouraging local entrepreneurship,” Galito said.
Trump's trade policies— including tariffs on imports, particularly from China— which are designed to protect American industries, could have complex implications for Guam, which relies on imported goods and its position within Pacific trade routes.
“The Republican-led Guam legislature must proactively engage with federal counterparts to ensure that the island's unique economic circumstances are considered in broader trade discussions, mitigating potential adverse effects on local businesses and consumers,” Galito said.
(With additional reports from Mar-Vic Cagurangan)
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