The Central Bank of Aruba Report

The CBA sent us a report recently. I recognized most of their findings, and it helped me confirm it was an extraordinary year. Not meant as a compliment.

I gleaned some stuff out, so you don’t have to read it, though it is interesting.

The abstract goes the following: In the first half of 2020, Aruba’s economy was severely distressed due to the COVID-19 pandemic. This was reflected in a steep drop in tourism credits and hotel occupancy rates. In addition, despite financial support and social assistance of the government, both consumption and investment indicators pointed to anemic economic conditions during the first two quarters of 2020. Likewise, import activities withered across all categories. Initial estimates of quarterly GDP growth indicate a contraction of, respectively, 4.9 percent and 34.6 percent during the first and second quarter of 2020.

Basically they say, we know, that our economy shrunk by more than one third!

We were hit the hardest in the Caribbean, because of our total dependence on tourism, and while we shut down later than most, and opened up earlier than other islands our economic decline reached double digits while theirs remained in the single zone — Jamaica for example: estimated GDP drop of between 8.2 and 9.7 percent. But they have great industry and agriculture, we don’t.

We were also hit the hardest because our share of tourism employment, in the island’s total employment, is 84.3%, which made us very vulnerable, when tourism ground to a halt.

But the CBA also reminds us that this trend of softening tourist nights spent on the island already started in 2019. Aruba’s tourism performance, they say, benefited from tourists seeking alternative holiday destinations after hurricanes Irma and Maria hit the Caribbean in 2017. In 2019, we started facing increased competition, following the restoration of tourism services in other Caribbean destinations.

Which means that 2017 and 2018 were banner years because of other islands’ disasters, and Aruba started slowing down in 2019.

How does CBA define our losses?

They say that Aruba’s tourism sector performance deteriorated in the first half of 2020.

Total visitor nights (-59.0 percent)

Total stay-over visitors (-60.3 percent),

Tourism credits at domestic banks (-40.2 percent)

The CBA discusses many economic aspects and also talks about GOA: The financial deficit of the Government of Aruba (GoA) reached Afl. 301.1M at the end of June 2020, compared to an Afl. 54.1M surplus, a year earlier.

The deterioration of the government’s financial situation was attributed to a decrease of Afl. 194.8M in total government revenue (-27.3 percent), and an expansion of Afl. 152.0M (+21.9 percent) in government expenditures at the end of the second quarter of 2020.

So here you have it, we earned too little and spent too much

And in conclusion:  The deterioration of the government’s financial situation was mainly on account of the impact of COVID-19, which caused widespread decreases in government revenue streams, in addition to surges in government expenditures. Consequently, the debt to-GDP ratio expanded from 73.7 percent (2019 Q4) to 93.5 percent (2020 Q2).

CBA reports a big hole in our economy without any mention or warning that GOA must reduce its expense level. The report also says that there were some savings, 12.5% of withheld salaries, but that was neutralized by the increased interest because of bond issues = more debt.

Isn’t the main purpose of the CBA to control inflation and provide stability to our currency? One major destabilizer of currency is GOA’s level of spending vs income. Yet, CBA doesn’t address it, not even by one word, they just hold up a mirror and allow us to draw conclusions.

I remember hearing critical opinions from past presidents of the CBA, the watchdogs of the economy, they gave GOA feedback, which GOA probably didn’t always like, lecturing about irresponsible behavior. Karam, and Henriquez come to mind. Mehran only served one year. I wonder why, perhaps because of too much criticism? Then for the past 12 years, Jeanette Semeleer.

I like to read the CBA reports; I find them thought-provoking: 49.4% decline in car sales? I can imagine. 24.8% decline in BBO? Of course we earned less and spent less. 29.5% less import duties? Ditto, and the CBA controlled our foreign currency expenditure. But a growth of 6.5% in personal loans? Yes, we needed money, and 12.7% growth in electric consumption, sure, we worked from home. 34.1% revenue loss for excise on gasoline? Naturally, we stayed put, and didn’t go anywhere.

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December 23, 2020
Rona Coster