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More economic overview

I received some more input about the Economic Overview, a twenty-five page document, covering 2021- 2023. It was recently circulated by The Department of Economic Affairs, Commerce and Industry, they said they are prudent with the projection for 2022 and 2023 due to increasing uncertainties in time. Therefore, these estimations have to be considered preliminary and used with care.

Here is some more feedback:

I was going to talk about the fact that we don’t have estimates for 2023 from the Central Bank, CBA, while Curacao has its Central Bank outlook for 2023.

Why is our CBA so scared to stick its neck out?

Forecasts are important to have, even if they’re wrong.

It’s important to have a sense of direction and the awareness of the risks involved.

In that sense I appreciate the effort of DEACI, The Department of Economic Affairs, Commerce and Industry.

Having said that, they don’t have a forecast for inflation.

They only have a GDP deflator, which is kind of similar, but not exactly the same thing.

I guess they also don’t want to get political with the whole VAT discussion.

But it would add transparency to see what the assumptions are.

They are probably underestimating the VAT effect.

Then I think growth percentage expected from the economy in 2023, is not that important.

The output gap is the important element; it is a crucial concept.

It’s the gap that still exists following the pandemic. It’s important the government adds this to the narrative because otherwise it gives too much space for CAft to argue that the economy is growing, and then, they say, Aruba should be in a good position to achieve a balanced budget or reduce its debt and start repaying.

We are growing the economy, but we are NOT closing the huge gap caused by the pandemic.

This means unemployment probably remains high, and collected tax low.

Speaking about unemployment.

This is missing altogether.

Reason being that the government has for decades underfunded data collection efforts.

So, it comes to bite us in the rear-end now.

In an outlook you should want to see exactly what the situation is with jobs.

Especially now with this output gap.

In the end that’s what it’s all about.

GDP can grow, but what is the situation with families, in real life.

Are they able to sustain a decent livelihoods?

 

More about the Almost-Storm, and the fuss around it:

My only annoyance is about our excessively expensive overhead meaning our “country management,” how little value we receive from being charged 50% of our GDP, for management, and still we’re running up debt. I am amazed how this system cannot improve itself, and therefore can only be expected to become more expensive and more wasteful.

The only “way” out, is to stop the revenues feeding this system.

The current economy does not produce sufficient revenues and the future economy, and this is not expected to improve.

Due to real inflation our tourist sales AND our local consumption will decrease.

This means even less revenues paying for the overhead.

The overhead is bankrupting us now, it will become clear soon, it’s only a matter of time.

“Stop wasting scarce resources” is the only way out.

We can only spend one florin once.

Overhead in any organization which delivers products or services should be lean and very effective since it does not produce anything itself but is designed to improve the primary production and service delivery processes.

If it does anything else, it is waste, and should be eliminated from the system.

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July 01, 2022
Rona Coster