Above: Aruba

By the Caribbean Journal staff

Aruba’s economy is “recovering gradually” from a “severe double-dip recession,” according to the International Monetary Fund, which recently concluded its 2015 Article IV Mission to the Dutch Caribbean island.

The recession was recovered by a pair of factors: the global financial crisis and the shutdown of the oil refinery in Aruba.

“These shocks have substantially increased public debt—over 80 percent of GDP in 2014—and eroded fiscal space,” the IMF said in a statement. “To address these fiscal challenges, the authorities have undertaken major entitlement reforms and are aiming to reach a small fiscal surplus in 2018.”

Without similar measures, however, the IMF warned that the pace of fiscal consolidation in the island could slow and public debt would continue to rise in the medium term.

Growth in Aruba is projected to rise by about 2.5 percent in 2015, which would put the island in favorable territory with the rest of the region, though.

The closure of the refinery, however, puts even more pressure on the island’s tourism sector, the IMF said.

That could compound the island’s risk, though, given its large dependence on tourists from the US and from Venezuela, with the latter’s economic crisis adding to the risk.

But the IMF said that Aruba had maintained its competitiveness in tourism, with its share of the Caribbean’s tourism market share continuing to grow.

“In addition, the authorities’ marketing efforts, access to new US hubs, and additional airlift capacity from South America have improved resilience,” the IMF said. “Increasing labor market flexibility and reducing the costs of doing business would not only further improve Aruba’s competitiveness, but would also help its adjustment to external shocks and facilitate diversification.”