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Aruba Country Risk Report 2017

Core Views

Economic growth in Aruba will tick upwards during the next 10-yearsdue to a steady increase in tourism arrivals growth and as the reopeningof Aruba's refinery bolsters fixed investment and exports. Thatsaid, the reopening of the refinery will not boost economic growthto the extent that the Aruban authorities expect given the financialdifficulties experienced by Petroleos de Venezuela.

Inflation will tick upwards over our 10-year forecast period drivenprimarily by a gradual recovery in domestic demand. Nevertheless,with the Centrale Bank van Aruba set to maintain its currency pegto the US dollar, anchoring imported inflationary pressures, headlineprice growth will remain relatively subdued.

Aruba's fiscal deficit will narrow over the next 10 years as the governmentimplements measures to cut spending and boost revenues.More prudent fiscal policy will drive a narrowing of the fiscal deficitand a moderation in the government's debt load.

Aruba's current account balance will remain largely in surplus overthe next 10 years driven primarily by robust tourism receipts andrefined oil exports. The country's stronger current account balance,compared to the previous five years, will ensure that Aruba's externaldebt remains sustainable over the next decade.

Aruba's political environment will remain stable over the next decadedriven primarily by policy continuity and rising economic growth. Inaddition, strong ties to the Netherlands will ensure continued improvementin the quality of Aruban institutions over the years ahead.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Refinery Project To Offset Tourism Headwinds
The refurbishment of Aruba's oil refinery and a modest uptick in government spending will see growth head higher in the next two
years. However, risks to the oil refinery project are significant, and we expect the tourism sector to struggle, tempering Aruba's growth
potential.
GDP By Expenditure Outlook
Tourism And Oil Refining Will Boost Economic Growth
Economic growth in Aruba will tick upwards during the next 10-years due to a steady increase in tourism arrivals growth and as the
reopening of Aruba's refinery bolsters fixed investment and exports. That said, the reopening of the refinery will not boost economic
growth to the extent that the Aruban authorities expect given the financial difficulties experienced by Petroleos de Venezuela.
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
Strengthening Current Account Will Ensure External Debt Sustainability
Aruba's current account balance will remain largely in surplus over the next 10 years driven primarily by robust tourism receipts and
refined oil exports. The country's stronger current account balance, compared to the previous five years, will ensure that Aruba's
external debt remains sustainable over the next decade.
TABLE: TOP FIVE EXPORTS
TABLE: TOP FIVE IMPORTS
Monetary Policy Framework
Recovery In Consumption Will Drive Inflation Upwards
Inflation will tick upwards over our 10-year forecast period driven primarily by a gradual recovery in domestic demand. Nevertheless,
with the Centrale Bank van Aruba set to maintain its currency peg to the US dollar, anchoring imported inflationary pressures, headline
price growth will remain relatively subdued.
Structural Fiscal Position
Fiscal Consolidation Efforts Will Keep Debt Load Sustainable
Aruba's fiscal deficit will narrow over the next 10 years as the government implements measures to cut spending and boost revenues.
More prudent fiscal policy will drive a narrowing of the fiscal deficit and a moderation in the government's debt load.
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
Long-Term Economic Outlook
On A Steady Road To Recovery
Aruba's tourism dependent economy will benefit from increased visitor arrivals in the years ahead as well as renewed investment into
its oil refinery. While the reopening of Aruba's oil refinery by Petróleos de Venezuela will provide a boost to economic growth we expect
growth to remain below the Aruban authorities' expectations due to the financial constraints on the state-owned oil company.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Contents
Chapter 2: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
AVP Favourites To Retain Power
The Aruban People's Party will win the country's September 2017 elections, benefiting from an ongoing economic recovery and a
divided opposition. The party will continue its policy of fiscal consolidation in the years ahead, gradually reducing the country's debt
burden.
Chapter 3: Demographic Outlook
Demographic Outlook
TABLE: POPULATION BY AGE GROUP
TABLE: POPULATION BY AGE GROUP %
TABLE: POPULATION HEADLINE INDICATORS
TABLE: KEY POPULATION RATIOS
TABLE: URBAN/RURAL POPULATION & LIFE EXPECTANCY
Chapter 4: BMI Global Macro Outlook
From Reflation To Disappointment
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: ARUBA – MACROECONOMIC DATA & FORECASTS

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