Prome Minister Mike Eman hunto cu Minister di Finacias Ing. Mike De Meza a anuncia e pronostico di Fitch diahuebs atardi den un rueda di prensa for di Bestuurskantoor. E agencia di ratingnan di credito a baha su pronostico for di Stabil pa uno Negativo. Click lesa mas pa e rapport completo.
Fitch Revises Aruba's Outlook to Negative; Affirms Ratings at 'BBB'
Fitch Ratings has revised the Outlook on Aruba's ratings to Negative from Stable. Fitch affirmed the long-term foreign and local currency Issuer Default Ratings (IDRs) at 'BBB'. The short-term IDR has been affirmed at 'F3'. The Country Ceiling has been affirmed at 'A-'.
The revision of the Outlook to Negative from Stable reflects Aruba's continued growth underperformance, large fiscal imbalances, rising government debt and increased economic vulnerability after the halt of fuel exports by the Valero refinery. Moreover, there is uncertainty related to the scope and pace of the fiscal consolidation process, especially given high budgetary rigidities and moderate economic growth prospects.
KEY RATING DRIVERS
Aruba's real GDP shrank by a cumulative 12% between 2008 and 2012 following the global financial crisis and the recurrent suspension of operations at the Valero refinery. The economy contracted by a five-year average of 2.4% in 2012 compared to a 2.9% expansion of the 'BBB' median. Economic activity could resume at an average of 2.6% in 2013-2015.
The present administration has undertaken measures to support economic activity through public investment, energy efficiency and diversification initiatives. Downside risks to growth remain depending on the tourism sector performance and the execution of large public-private partnerships to transform the infrastructure network and energy matrix of the island.
In light of difficult economic conditions, the government implemented measures to contain rising spending pressures coming from the pensions and healthcare systems. Nevertheless, the fiscal deficit widened to 8.5% of GDP in 2012 from 7.9% in 2011. Persistent and material deviations from the official growth and deficit reduction targets have weakened fiscal policy predictability and led to deteriorating debt dynamics.
The government aims to balance the budget by 2016 through revenue-enhancing measures, current expenditure restraint and entitlement reforms. However, the magnitude of the present fiscal gap, continued spending pressures, a moderate economic recovery and possible population's fatigue to further tax increases and entitlement reforms, pose risks to the pace of fiscal consolidation.
General government debt climbed to 55% of GDP and 247% of fiscal revenue in 2012, rapidly diverging from the 40% and 141% respective medians of the 'BBB' category. Fitch's base case assumes the government debt burden to continue increasing in the absence of timely and effective fiscal consolidation.
Continued access to domestic and international capital markets have provided the sovereign with sufficient fiscal financing flexibility. Aruba's contingent support from the Netherlands to borrow externally enhances investor confidence and could reduce rollover and interest rate risks.
Adequate reserve coverage underpins confidence in the exchange rate peg and the authorities' ability to cope with balance of payments pressures. Foreign direct investment and external borrowing are expected to cover the increase in foreign exchange requirements without exerting strain on international reserves.
Aruba's 'BBB' ratings are supported by its impeccable debt repayment record, high per capita income, strong rule of law, political and social stability. The country also enjoys a high degree of consensus among policymakers and key stakeholders on the main tenets of economic policies, which has been further cemented under the Social Dialogue platform since 2010.
The Negative Outlook reflects the following risks factors that may, individually or collectively, result in a downgrade of the ratings by up to one notch:
--Continued growth underperformance and failure to adopt adequate fiscal measures that improve debt sustainability prospects.
--Emergence of financing constraints.
--Deterioration in the institutional relationship between Aruba and the Netherlands.
Fitch's sensitivity analysis does not anticipate developments with a material likelihood of leading to a rating upgrade in the short-term. However, future developments that may, individually or collectively, lead to a stabilization of the Outlook include:
--Progress towards fiscal deficit reduction including measures to address structural weaknesses of public finances such as a low revenue base and rising entitlements commitments.
-- A sustained economic recovery with positive effects on employment creation, domestic consumption and fiscal prospects.
The ratings and Outlooks are sensitive to a number of assumptions:
--The growth and external forecasts assume that refining operations and fuel exports by Valero will remain suspended during 2013 - 2015. However, the company will continue to be a provider of transhipment services during this period.
--Fitch factors in a mild recovery in the U.S. and assumes that there are no additional foreign exchange restrictions in Venezuela that could impair growth in the hospitality industry. These two countries account for 75% of tourist arrivals to Aruba.
--Fitch expects a smooth transition of power and no material departures from the current macroeconomic policy direction irrespective of the outcome in the general elections on Sept. 27, 2013.
-- Fitch assumes that Aruba will continue to benefit from broad support from the Dutch government as it is part of the Kingdom of the Netherlands.
Additional information is available on www.fitchratings.com.
Applicable Criteria and Related Research:
--'Sovereign Rating Criteria' (Aug. 13, 2012);
--'Country Ceilings' (Aug. 9, 2013).
Applicable Criteria and Related Research:
Sovereign Rating Methodology