Economic Snapshot July 2021

The Centrale Bank van Aruba (CBA) recently updated its previously published Gross Domestic Product (GDP) estimates and outlook for 2020 and 2021, and published its results today.

Read the full Economic Snapshot report, as well as the press releases in Papiamento, Dutch and English.

 

Executive Summary

 

The latest projections by the Centrale Bank van Aruba (CBA) foresee a rebound in output in terms of real Gross Domestic Product (GDP) for 2021. Specifically, real GDP is expected to grow by 15.5 percent under the optimistic scenario, 12.7 percent under the baseline scenario, and 8.2 percent under the pessimistic scenario.

Total inflation in 2021 is estimated at 0.0 percent, as a result of the diminishing effect of the electricity tariff reduction in January 2020, as well as the anticipated gradual increase in the price of gasoline. However, core inflation is expected to become negative in 2021, reaching -0.1 percent at the end of the year. In conjunction with pay cuts in the public sector, and the anticipated drop in the Average Daily Rate (ADR), a negative deflator for overall GDP is observed.

The main driver for the 2021 envisaged recovery in economic activities is the tourism sector, as it continues its path to a relatively strong recovery. Each scenario deviates from the baseline based upon the expected number of stay-over visitors in 2021 and its impact on the export of services, benchmarked against the 2019-level. The optimistic scenario assumes stay-over visitors to recover to 58.0 percent of the 2019-level, the baseline 55.0 percent, and the pessimistic scenario 49.0 percent.

The execution pace of the construction projects related to private investments differs in each scenario. In addition, a different unemployment rate, given the recovery of the tourism sector is assumed in each scenario. Therefore, the performance in private consumption is dependent on developments in the labor market, which in turn are determined by the strength of tourism recovery. The Emergency Social Assistance Fund (FASE) program and the wagesubsidy program, which are assumed to be available throughout the year, also positively contribute to private consumption.

This document includes estimates and forecasts that represent assumptions and expectations of the Centrale Bank van Aruba considering information available up to and including April 2021. These estimates and forecasts involve uncertainties. Therefore, the actual results may eventually differ from those estimated and projected in this document. Consequently, no guarantee is presented or implied as to the accuracy of specific estimates and forecasts contained herein. The Centrale Bank van Aruba does not assume any liability for any loss that may result from reliance on this information.