Press Release: IMF Executive Board Concludes 2014 Article IV Consultation Discussions with the Kingdom of the Netherlands—Curaçao and Sint Maarten
IMF News, August 27, 2014
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- Published: August 27, 2014
Summary of consultation outcome
- On July 30, 2014, the Executive Board concluded the 2014 Article IV consultation discussions with Curaçao and Sint Maarten and considered and endorsed the staff appraisal without a meeting.
- Both countries brought fiscal policies into compliance with the fiscal rules agreed with the Netherlands in 2010 in exchange for significant debt relief after some initial slippages.
- The union’s current account deficit, identified as the key vulnerability in the 2011 Article IV discussions, has been gradually but steadily reduced, though it remains large.
Recent economic performance and near-term outlook
- Curaçao:
- Real GDP contracted by an estimated 0.5 percent in both 2012 and 2013 due to fiscal adjustment, decline in the international financial sector, slow global recovery, and structural weaknesses.
- Near-term support from construction of a large new hospital is expected.
- Sint Maarten:
- Grew by about 1 percent on average over 2012-13, supported by recovery in the United States (the source of 60 percent of its tourists) and construction of the Simpson Bay causeway.
- Improving global outlook and recovery in tourism expected to support activity in the near term, especially in Sint Maarten.
- Medium-term growth should accelerate if structural bottlenecks hampering investment, innovation, and competitiveness are addressed.
Executive Board assessment — key findings
- Authorities of both countries made important efforts to strengthen their underlying fiscal position.
- Fiscal policy should continue to support external adjustment and build buffers.
- Curaçao has decisively addressed spending pressures related to its aging population.
- The current wage restraint efforts should be maintained; next government should build on efforts to keep public wage developments in check, including reviewing existing indexation mechanisms.
- Keeping public sector wage growth firmly in line with productivity is important for signaling to private sector wages.
Policy recommendations — fiscal, financial, structural, and statistical
- Fiscal policy and public finance:
- Continue to gear fiscal policy toward supporting ongoing external adjustment and building buffers.
- Curaçao should:
- Reform the public sector pension system.
- Achieve further efficiency gains in the public apparatus.
- Improve governance of its public companies.
- Sint Maarten should:
- Strengthen the tax administration to tackle declining tax compliance and fund newly acquired functions.
- Bolster revenues via increased contributions to the budget by public companies.
- Labor market and social protection:
- Review rigid labor laws and the system of welfare payments for unemployed to shift emphasis from protecting jobs to protecting workers.
- Facilitate needed cyclical adjustments in the workforce and ensure adequate incentives and support for job search.
- Remove restrictions to hiring foreign workers while ensuring adequate labor conditions for all workers.
- Financial sector and central bank actions:
- Central bank should encourage prudent lending behavior and closely monitor deteriorating asset quality.
- Avoid bank-level credit ceilings; sterilize banks’ excess liquidity through more aggressive use of certificates of deposits and further reserve requirement increases as appropriate.
- Over time, remove existing limits and penalties on outward investment by pension funds.
- Divest central bank holdings of non-financial corporates’ bonds as planned and refrain from direct financing of non-financial companies in the future.
- Structural reforms and competitiveness:
- Tackle the maze of permits and licenses that has hampered investment and innovation, especially in Curaçao.
- These reforms would underpin the currency peg via increased flexibility, competitiveness, and resilience to shocks.
- Statistics and data:
- Improve statistical infrastructure and data through greater investment and, where appropriate, technical assistance; current data are not adequate for effective macroeconomic analysis, surveillance, and policy response.
Curaçao — selected economic and financial indicators (2009–15)
- Geography and demographics:
- Area: 444 (km2)
- Population, thousand (2013): 152.8
- Percent of population below age 15 (2013): 20.5
- Literacy rate, in percent (2010): 96.7
- Percent of population aged 65+ (2013): 13.7
- Life expectancy at birth, male (2012): 74.4
- Infant mortality, over 1,000 live births (2012): 11.3
- Life expectancy at birth, female (2012): 80.7
- Real economy (change in percent, selected years and series):
- Real GDP 1/: -0.6 (2009), -3.6 (2010), -0.5 (2011), 0.7 (2012), 0.9 (2013)
- Private consumption: -5.5 (2009), 7.0 (2010), 0.0 (2011), -2.5 (2012), -1.0 (2013), 0.3 (2014)
- Public consumption: 2.9 (2009), 1.6 (2010), -2.0 (2011), -0.1 (2012), -3.8 (2013), 0.1 (2014)
- Gross fixed investment: 1.3 (2009), -2.8 (2010), 0.4 (2011), 0.2 (2012), 2.5 (2013)
- Net foreign balance 2/: 1.0 (2009), -8.5 (2010), 3.0 (2011)
- Prices and labor:
- CPI (12-month average): 1.8 (2009), 2.8 (2010), 2.3 (2011), 3.2 (2012), 1.9 (2013), 2.0 (2014)
- Unemployment rate (in percent): 9.6 (2009), 9.7 (2010), 9.8 (2011), 11.5 (2012), 13.0 (2013), 12.4 (2014), 11.9 (2015 Proj.)
- General government finances (in percent of GDP):
- Primary balance: 10.4 (2009), -2.1 (2010), -1.1 (2011), -1.6 (2012), Primary balance w/o debt relief: 2.1 (2009), 5.4 (2010), -1.5 (2011)
- Current balance: 8.1 (2009), 10.0 (2010), 1.5 (2011), 1.2 (2012)
- Overall balance: 7.8 (2009), -3.0 (2010), -1.4 (2011), -2.4 (2012)
- Public debt: 43.6 (2009), 28.1 (2010), 34.5 (2011), 29.9 (2012), 31.3 (2013), 37.6 (2014), 36.2 (2015)
- Balance of payments (in percent of GDP):
- Goods trade balance: -37.0 (2009), -41.3 (2010), -39.5 (2011), -41.7 (2012), -38.3 (2013), -37.1 (2014), -36.4 (2015)
- Exports of goods: 23.5 (2009), 23.1 (2010), 30.5 (2011), 30.3 (2012), 22.4 (2013), 22.6 (2014), 22.5 (2015)
- Imports of goods: 60.5 (2009), 64.4 (2010), 70.1 (2011), 72.0 (2012), 60.8 (2013), 59.7 (2014), 58.9 (2015)
- Service balance: 8.4 (2009), 14.3 (2010), 17.4 (2011), 21.7 (2012), 23.4 (2013), 25.3 (2014)
- Exports of services: 37.1 (2009), 32.4 (2010), 40.4 (2011), 45.4 (2012), 49.7 (2013), 50.5 (2014), 51.4 (2015)
- Imports of services: 23.9 (2009), 26.2 (2010), 28.0 (2011), 27.1 (2012), 26.1 (2013)
- Current account: -16.7 (2009), -30.9 (2010), -27.3 (2011), -28.1 (2012), -21.1 (2013), -17.1 (2014), -13.3 (2015)
- Capital and financial account: 8.5 (2009), 26.7 (2010), 26.4 (2011), 24.8 (2012), 19.5 (2013), 18.1 (2014), 16.1 (2015)
- Net FDI: 1.7 (2009), 2.4 (2010), 1.4 (2011)
- Reserves and external debt:
- Net official reserves (in millions of US dollars): 929.4 (2009), 1,234.0 (2010), 1,244.1 (2011), 1,246.3 (2012), 1,220.6 (2013), 1,293.8 (2014), 1,440.4 (2015)
- (in months of imports of goods): 6.4 (2009), 6.6 (2010), 7.6 (2011), 7.9 (2012), 8.6 (2013)
- (In percent of short-term debt): 76.2 (2009), 83.8 (2010), 90.5 (2011), 109.9 (2012), 124.6 (2013), 119.9 (2014), 122.9 (2015)
- External debt (in percent of GDP): 74.2 (2009), 107.3 (2010), 102.8 (2011), 93.2 (2012), 103.3 (2013), 109.6 (2014), 114.7 (2015)
- Memorandum items:
- Nominal GDP (in millions of US dollars): 2,871 (2009), 2,951 (2010), 3,039 (2011), 3,131 (2012), 3,162 (2013), 3,282 (2014), 3,407 (2015)
- Per capita GDP (change in percent): -4.1 (2009)
- Real effective rate (2007=100): 93.8 (2009), 100.1 (2010), 97.6 (2011), 96.3 (2012), 95.6 (2013)
- Fund position:
- Curaçao is part of the Kingdom of the Netherlands and does not have a separate quota.
- Exchange rate: The Netherlands' Antilles guilder is pegged to the U.S. dollar at NA.f 1.79 = US$1.
St. Maarten — selected economic and financial indicators (2009–15)
- Geography and demographics:
- Area: 34 (km2)
- Population (2012): 39
- Percent of population below age 15 (2010): 95.8
- Percent of population aged 65+ (2010): 3.6
- Life expectancy at birth, male (2010): 73.1
- Infant mortality, over 1,000 live births (2010): 6.0
- Life expectancy at birth, female (2010): 78.2
- Key series (selected values excerpted from the table):
- Real GDP growth rates and other series are reported in the source table for 2009–15 (series include Real GDP, Private consumption, Public consumption, Gross fixed investment, Net foreign balance, CPI, Unemployment rate, General government finances, Balance of payments, Reserves, External debt, Memorandum items).
- Specific numeric entries in the source include, for example:
- Real effective rate (2000=100): 101.4 (2009), 103.0 (2010), 103.5 (2011), 106.2 (2012), 104 (2013)
- Nominal GDP (in millions of US dollars, memorandum): 855 (2009), 892 (2010), 932 (2011), 983 (2012), 1,021 (2013), 1,070 (2014), 1,117 (2015)
- Fund position:
- St. Maarten is part of the Kingdom of the Netherlands and does not have a separate quota.
- Exchange rate: The Netherlands' Antilles guilder is pegged to the U.S. dollar at NA.f 1.79 = US$1.
Notes on Article IV and procedural conclusion
- Under Article IV, the IMF holds bilateral discussions with members, usually every year; a staff team visits the country, collects information, and prepares a report forming the basis for Executive Board discussion.
- Article IV consultations are concluded without a Board meeting when conditions apply, including: (i) no acute or significant risks or general policy issues requiring Board discussion; (ii) policies unlikely to have significant regional or global impact; (iii) parallel program review, if any, also completed on a lapse-of-time basis; and (iv) Fund resources are not under discussion or anticipated.
Press Release No. 14/384 — IMF Communications Department, August 27, 2014.