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Macro-economic developments for the near future in Aruba

Presentation given for corporate clients of Aruba Bank
by

Martijn Balkestein

on 29 April 2014

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Transcript of Macro-economic developments for the near future in Aruba

nfo
CBS
As sure as the spring will follow the winter, prosperity and economic growth will follow recession.
Bo Bennett
3. Some specific indicators
Macro economic indicators:
what are the statistics telling us?
2. GDP per capita
Outline of the presentation
1. General development of the economy
Let’s start from the beginning...

... and dig up some statistics
Aruba’s growth has been on a downward slide…
The 5 year moving average Real GDP growth was as high as 12% in 1990 and is currently -2%
James Surowiecki
Obviously, there is a strong correlation between the price of electricity and the volume consumed by people
Consumption of water is also strongly influenced by its price
Time to be creative
With possibly increasing excise duties on imports and excise taxes, one need to:
diversify products (less luxury, incl. basic goods)
increase turnover (focus on new markets)
lower fixed costs (storage, energy use, personnel)
increase productivity (capital investment, automation,...)
Central Burau of Statistics Aruba
Martijn Balkestein
+00297-5837433
cbs@setarnet.aw
You can't fuel real economic growth with indiscriminate credit. You can only fuel it with well-allocated, long-term investment.
Aruba's challenge: rebuilding policy space, supporting recovery
Like 2 get more?
The road to economic
recovery

.... can be challenging
....or is maybe just around the corner
Till recently, Aruba had macro-economic stability
Aruba is a high income country ...
.... with low fiscal deficits
...moderate public indebtness,
.... and external imbalances in check
Real GDP
Development of nominal GDP 2000 – 2013
During 2000 – 2013 total growth was 38.7% or 2.6% per year (compounded growth)
During 2007 – 2013 total growth was -0.9%.
In nominal terms Aruba’s GDP in 2013 is projected to reach the level of 2007

Nominal GDP
Three cyclical periods:
2001-2003: 3-year lower cycle
2004-2008: 5-year higher cycle
2009-2013: 5-year lower cycle
Real GDP pa capita
If we compare 2013 with 2000 or 2007, we see a decline of 17%

Economic growth, since 1990
…what is Aruba’s collective aspiration for the following years?

Or

…what level of GDP can be achieved?


X

2013

2000



What does this mean
for every day life?



Average real GDP per capita

The 14-year average GDP per capita is about AFL 34,000 per year.
In 2013 Aruba is at a level of AFL 30,500 per year.

The fundamental questions
that arises are…

What does this mean for every day life?
This is of course a policy matter and subject to various developments beyond the island’s control as well…



…but still…

That means that if the average earning power in the year 2000 was enough to feed 6 persons (2 adults and 4 children)…
in 2013, the average earning power is enough to feed 5 persons

Which path shall we take…
Go back to the average of 2000-2008: AFL 36,000
Go back to the average of 2000-2013: AFL 34,000
Settle for average of 2009-2013: AFL 31,000

…what is Aruba’s collective aspiration for the following years?

Or

…what level of GDP can be achieved?


2013

2000

What does this mean
for every day life?
Average real GDP per capita

The 14-year average GDP per capita is about AFL 34,000 per year.
In 2013 Aruba is at a level of AFL 30,500 per year.

The fundamental questions
that arises are…

This is of course a policy matter and subject to various developments beyond the island’s control as well…



…but still…

That means that if the average earning power in the year 2000 was enough to feed
6
persons (2 adults and 4 children)…
in 2013, the average earning power is enough to feed
5
persons

Which path shall we take…
Go back to the average of 2000-2008: AFL 36,000
Go back to the average of 2000-2013: AFL 34,000
Settle for average of 2009-2013: AFL 31,000

Let’s place this question into perspective…

…..

…from a statistician’s point of view!

Assumptions:
Average annual inflation: 2.5%
Average population growth: 1.0%

One “Valero” unit

How much does the nominal GDP have to grow to maintain the same level of GDP per capita as in the year 2013?


How much does the nominal GDP have to grow to reach the level of GDP per capita during the period 2000-2008?


Assumptions:
Average annual inflation: 2.5%
Average population growth: 1.0%

How much does the nominal GDP have to grow to reach several levels of GDP per capita?


at
What does this mean in terms of real GDP growth?

The sales of different goods show some interesting trends in volume and price
What does this mean in terms of real GDP growth?
Water distribution to households in m3


Water supply in Afl (based on an average per household)
Electricity usage households in kWh

Price of electricity in Afl (based on a monthly average 725.5 KWH per household)

Real GDP per capita decreased with 17% since 2007, affecting our purchasing power
If order to reach pre-crisis real GDP level in 2018, average real GDP-growth need to be almost 5%
Aiming to reach this level in 2023 implies a growth of 3%
Tourism
Valero
Income:
(export)
Expenditure:
(import)
1) Future risks: Higher oil prices and high dependency on tourism

2) Headwinds: AOV, AZV, PPP
government bill

3) Lower labor productivity

4) Access to credit for domestic enterprises
Full transcript