Fitch Ratingson April 26 affirmed Aruba's long-term foreign and local currency issuer defaultratings at BBB- with a stable outlook.
Fitch also affirmedthe country ceiling at BBB and short-term foreign currency issuer default ratingat F3. The outlooks on the long-term issuer default ratings are stable.
The ratingsare based on the Aruban government's progress in stabilizing its public finances.The central government deficit was 3.7% of GDP in 2015 on a cash basis and 2% ofGDP on an accrual basis, both showing a decline from 9.4% of GDP in 2014. Fitchexpects the deficit to continue shrinking to 2017.
Meanwhile, Fitchbelieves the government debt ratio will stabilize in 2017, in advance of the government'sgoal of bringing down the debt ratio by 2018. The increase in government debt hasslowed although it will remain high compared with the BBB median, Fitch said. Onthe other hand, "access to financing has improved with the timely approvalof the 2016 budget," Fitch noted.
While Fitch expects Aruba's tourism to continue its spike in 2016, it saysreal GDP growth will likely remain stunted. The country's economy expanded just0.1% in real terms during 2015, due to subdued private consumption and governmentspending. The rating agency sees 1% growth in 2016 and 2% in 2017, with major upsiderisks if the country's oil refinery reopens. It was closed in 2012 to process Venezuelanheavy oil and its reopening would have a major impact on growth, employment andgovernment revenue, Fitch said.
Aruba's ratingsare anchored on its relatively high income per head and sound governance indicators,which stem from its membership of the Kingdom of the Netherlands with separate status,Fitch noted. Aruba also sources strengths from having a stable two-party democracyand parliamentary elections that are likely to result in policy continuity as wellas a spotless debt service record. These structural strengths, however, are balancedby a narrow, tourism-dependent economic base and small size, which present a vulnerabilityto shocks.