ORANJESTAD, Aruba – The International Monetary Fund (IMF) recently published Aruba’s staff concluding statement of the 2023 Article IV Mission.
At a recent press conference, prime minister of Aruba, Evelyn Wever-Croes, shared the IMF’s financial and economic assessment.
During their last visit to the island, an IMF team met with local authorities to analyze our financial position, and the mission issued the following statement, summarizing key conclusions and recommendations.
GDP growth
The IMF indicates a growth of 27.6 percent in 2021 and 7.3 percent in 2022.
Budget deficit/surplus:
The deficit/surplus of the national budget declined from -16.2 percent to -0.5 percent over the past two years and is expected to turn into a 1 percent surplus by the end of 2023. The IMF concludes that Aruba is on the right track financially.
Government spending
The final statement indicates that government spending is appropriate.
Public debt
Government debt fell from a peak of 112.3 percent of GDP in 2020 to 90.7 percent of GDP by the end of 2022, and the IMF expects a reduction in government debt to 71 percent of GDP in 2028, which is close to 70 percent agreed with the Netherlands for 2031.
Unemployment
According to the IMF, unemployment is falling. Before the pandemic, the unemployment rate was 5.9 percent and rose to 8.8 percent due to the pandemic. In 2022, this rate dropped to 6.6 percent, and data shows it is still falling. That means more people are working.
Economic growth
The IMF forecasts economic growth of 2.3 percent for 2023 and 1.1 percent for the coming years.
Inflation
In 2022, the IMF forecast inflation for 2023 at 5.5 percent, but it is currently at 4.9 percent, and expects it to reach 3.2 percent by the end of 2023. In addition, the IMF has warned the government of the risks that it must take n into account. One such risk is the global slowdown that could affect inflation.
The IMF is not convinced that the government will achieve the 1 percent surplus and recommends implementing the remaining planned tax reforms to support their 2023 fiscal target, such as the BBO at the border, the introduction of VAT, and stricter tax compliance. The IMF advises the government to increase the contribution rate for the AOV pension and/or lower the replacement ratio to strengthen the system’s solvency but also on the labor market, integrity, and climate change. These recommendations have the full attention of the government.
Aruba recovering
According to the IMF, Aruba achieved “a strong recovery from the pandemic” as the effects of the pandemic wore off and tourism returned stronger than ever.
