Aruba Long-Term Ratings Lowered to 'BBB' From 'BBB+' On Weaker Economy and Higher Debt; Outlook Stable

• On March 15, 2021, S&P Global Ratings lowered its long-term foreign and local currency sovereign credit ratings on Aruba to 'BBB' from 'BBB+'. The outlook was revised to stable.
• Aruba has the largest exposure to the tourism of any sovereign rated by the agency. Furthermore, the severe hit to the country's economy by the COVID-19 pandemic and its aftermath is expected to be more prolonged than anticipated. S&P also expects the government will rely more heavily on borrowing to fund its expenditures, pushing debt levels higher.
• The stable outlook considers the economic and fiscal challenges the country faces, alongside the support afforded by the agreement reached between it and the Netherlands in late 2020. 
• The agreement underscores the Netherlands' strong commitment to providing concessionary financial assistance to Aruba while laying the groundwork for reforms and aiming to limit the severity of the effects of the pandemic.
• Aruba is highly vulnerable given its lack of economic diversity and high dependence on the Kingdom of the Netherlands for support. That being said, the continued support from the kingdom bodes well for the country’s credit profile. Notwithstanding, if the effects of the pandemic continue to weigh on the fiscal accounts this could weaken Aruba’s creditworthiness further.

(Source: S&P Global Ratings & NCBCM Research)