Aruba: Country Economic Forecast: 22 Nov 2011

Oxford Economics
November 22, 2011
4 Pages - SKU: OFE6683137
Countries covered: Aruba

GDP fell by 2.9% in 2010, following a steep 11% plunge in 2009. The economy has suffered severely both from the global crisis and its impact on tourism and construction, as well as the shutdown of the Valero oil refinery in July 2009. According to the central bank the direct impact of the refinery's closure throughout 2010 was to subtract 3.4% points from GDP, implying that the rest of the economy started to move out of recession last year. With the various disputes between Valero and the government resolved, and refining profitability much improved, the refinery re-opened in 2011Q1. Together with a further pick-up in tourism and a rebound in private and public investment, this is forecast to lift GDP by almost 8% this year. In June, the central bank forecast nearly 9% growth, but the deterioration in the world economy since then is likely to have dampened prospects. Sluggish tourism growth will limit GDP growth to 1.5% in 2012. The large current account deficit of 17% of GDP in 2010 is expected to be followed by a small surplus this year due to the refinery coming back onstream. However, it is forecast to move back into deficit in 2012 as a weak world economy puts downward pressure on refining margins. Driven by sharply higher food, fuel and housing costs, inflation rose from 0.5% in January to 6.9% in August before easing to 6.5% in October. However, the pressures are now set to moderate and inflation is expected to average 3.5% in 2012.



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