IMF Executive Board Concludes 2016 Article IV Consultation Discussions with the Kingdom of the Netherlands‑Curaçao and Sint Maarten
IMF News, August 22, 2016
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- Published: August 22, 2016
Overview
- On July 27, 2016, the Executive Board of the International Monetary Fund (IMF) concluded the 2016 Article IV Consultation discussions with Curaçao and Sint Maarten and considered and endorsed the staff appraisal without a meeting.
- The currency union of Curaçao and Sint Maarten has important strengths, including a high level of development, good infrastructure, and relatively low public debt, but faces critical challenges: lackluster growth, high unemployment levels, and slow progress on necessary fiscal and structural reforms.
Economic performance and projections
- Recent growth:
- Curaçao: growth of 0.1 percent in 2015 after a contraction of 1.1 percent in 2014.
- Sint Maarten: growth of 0.5 percent in 2015, down from 1.5 percent in 2014.
- Drivers in 2015:
- Curaçao: increase in investment (public and private), largely driven by construction of the new hospital and road upgrades.
- Sint Maarten: increase in stay-over tourist arrivals; limited private investment except for expansion at the Princess Juliana International Airport.
- 2016 projections:
- Real GDP growth: 0.5 percent in Curaçao and 0.7 percent in Sint Maarten.
- Rationale: Curaçao—continued recovery in trading partners (especially the U.S.) and continuation of investment projects; Sint Maarten—higher private spending in tourism and transportation and moderate increase in tourism flows.
- Medium-term projections:
- Growth expected to pick up to 0.9 percent for Curaçao and 1.3 percent for Sint Maarten.
- Main dependence: implementation of structural reforms to attract FDI, relax restrictions on hiring foreign labor, and reduce costs of doing business.
Executive Board assessment and risks
- Positive near-term developments:
- Economic recovery and a stronger fiscal position have helped reduce near-term risks.
- Curaçao ended a three-year recession in 2015 despite deterioration in macroeconomic conditions in Venezuela.
- Sint Maarten recorded a fourth consecutive year of expansion, albeit decelerating modestly.
- Union’s external and fiscal imbalances have declined due to favorable external conditions and authorities’ fiscal consolidation efforts.
- Downside risks to medium-term growth:
- Continued low growth in the euro area could have serious repercussions given heavy reliance on the euro area.
- Further disruptions in Venezuela could worsen Curaçao’s growth prospects and balance of payments if alternative export markets are not identified.
- A loss of CBRs could hinder cross-border transactions and add macroeconomic uncertainties.
- Slow progress in implementing needed structural reforms poses an important downside risk.
Policy recommendations and priorities
- Unlock growth through economic diversification and investment promotion:
- Implement national development plans, focusing on strategic sectors and markets.
- Decisive structural reforms to improve the labor market and doing business conditions.
- Energy sector reforms to diversify energy generation via renewable sources.
- Fiscal policy:
- Establish a sound medium term fiscal framework with clear objectives and targets to reinforce macro stability anchored by the fixed exchange rate.
- Strengthen fiscal discipline via structural fiscal reforms; address weaknesses in tax administration and public financial management.
- Staff welcome authorities’ efforts to strengthen tax administration to enhance revenue mobilization, improve taxpayer services, and increase tax compliance.
- Develop an action plan to ensure timely and decisive implementation of measures to strengthen public financial management in line with PEFA assessment recommendations.
- Financial sector and transparency:
- Strengthen risk-based financial supervision and effective implementation of cross-border tax information sharing and AML/CFT frameworks in line with international standards.
- Improve transparency, including in Curaçao’s international financial center, to reduce perceived reputational risks and support a stable financial sector.
- Capacity building and technical assistance:
- Invest in human capital development to strengthen public institutions and productivity.
- Engage international partners for technical assistance to support capacity building.
- Data provision:
- Improve statistical capacity, address delays in data submission from private sector and government entities, allocate additional resources to increase personnel, and obtain technical assistance to address shortcomings.
Key statistics — Curaçao (Table 1: Selected Economic and Financial Indicators, 2012–17)
- Area: 444 (km2)
- Population, thousand (2015): 155
- Percent of population below age 15 (2015): 18.9
- Literacy rate, in percent (2010): 96.7
- Percent of population aged 65+ (2015): 15.3
- Life expectancy at birth, male (2015): 74.8
- Infant mortality, over 1,000 live births (2015): 12.2
- Life expectancy at birth, female (2015): 81.0
- Real GDP (change in percent):
- 2012: -0.1
- 2013: -0.8
- 2014: -1.1
- 2015: 0.1
- 2016 (Proj.): 0.5
- 2017 (Proj.): 0.7
- CPI (12-month average):
- 2012: 3.2
- 2013: 1.3
- 2014: 1.5
- 2015: -0.5
- 2016 (Proj.): 0.8
- Unemployment rate (in percent):
- 2012: 11.5
- 2013: 13.0
- 2014: 12.6
- 2015: 11.7
- 2016 (Proj.): 11.4
- 2017 (Proj.): 11.1
- General government finances (in percent of GDP):
- Primary balance: 2012: 0.2; 2013: -0.7; 2014: -1.7; 2015: -1.4; 2016 (Proj.): -1.5
- Current balance 2/: 2012: 2.3; 2013: 0.6; 2014: 1.1; 2015: 1.0
- Overall balance: 2012: -1.8; 2013: -2.8; 2014: -2.5; 2015: -2.7
- Public debt: 2012: 33.1; 2013: 34.1; 2014: 38.6; 2015: 44.3; 2016 (Proj.): 44.5
- Balance of payments (in percent of GDP):
- Goods trade balance: 2012: -41.7; 2013: -38.3; 2014: -35.4; 2015: -32.9; 2016 (Proj.): -32.1; 2017 (Proj.): -31.6
- Exports of goods: 2012: 30.3; 2013: 22.3; 2014: 22.1; 2015: 15.2; 2016 (Proj.): 14.6; 2017 (Proj.): 14.7
- Imports of goods: 2012: 72.0; 2013: 60.5; 2014: 57.6; 2015: 48.1; 2016 (Proj.): 46.6; 2017 (Proj.): 46.3
- Service balance: 2012: 17.4; 2013: 21.7; 2014: 26.5; 2015: 19.1; 2016 (Proj.): 18.2
- Exports of services: 2012: 45.4; 2013: 49.9; 2014: 54.2; 2015: 47.8; 2016 (Proj.): 46.0; 2017 (Proj.): 46.5
- Imports of services: 2012: 27.9; 2013: 28.2; 2014: 27.7; 2015: 28.6; 2016 (Proj.): 27.8; 2017 (Proj.): 27.6
- Current account: 2012: -27.9; 2013: -21.0; 2014: -11.9; 2015: -15.3; 2016 (Proj.): -15.2; 2017 (Proj.): -13.8
- Capital and financial account: 2012: 23.6; 2013: 20.2; 2014: 16.8; 2015: 14.5; 2016 (Proj.): 15.8; 2017 (Proj.): 14.1
- Net FDI: 2012: 1.9; 2013: 2.8; 2014: 3.5; 2015: 3.6
- Net official reserves (in millions of US dollars):
- 2012: 1,246.3; 2013: 1,096.4; 2014: 1,337.0; 2015: 1,344.9; 2016 (Proj.): 1,366.0; 2017 (Proj.): 1,378.5
- (in months of imports of goods and services): 2012: 4.8; 2013: 4.7; 2014: 6.0; 2015: 6.7; 2016 (Proj.): 6.9
- (In percent of short-term debt): 2012: 146.9; 2013: 109.3; 2014: 125.0; 2015: 125.9; 2016 (Proj.): 128.9; 2017 (Proj.): 121.3
- External debt (in percent of GDP): 2012: 81.3; 2013: 86.9; 2014: 93.7; 2015: 103.4; 2016 (Proj.): 110.9; 2017 (Proj.): 116.4
- Memorandum items:
- Nominal GDP (in millions of US dollars): 2012: 3,133; 2013: 3,148; 2014: 3,160; 2015: 3,146; 2016 (Proj.): 3,186; 2017 (Proj.): 3,256
- Per capita GDP (in US dollars): 2012: 20,979; 2013: 20,879; 2014: 20,622; 2015: 20,260; 2016 (Proj.): 20,154; 2017 (Proj.): 20,396
- Per capita GDP (change in percent): 2012: 2.1; 2013: -1.2; 2014: 1.2
- Private sector credit (change in percent): 2012: 6.4; 2013: -1.0; 2014: …
- 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.
Key statistics — Sint Maarten (selected items from Table 2: Selected Economic and Financial Indicators, 2012–17)
- Area: 34 (km2)
- Population, thousand (2015): 38
- Percent of population below age 15 (2015): 21.2
- Literacy rate, in percent (2011): 93.8
- Life expectancy at birth, male (2012): 69.2
- Infant mortality, over 1,000 live births (2010): (data cell blank in source)
- Life expectancy at birth, female (2012): 77.1
- Real economy (change in percent): (table entries include)
- 2012: 1.7
- 2013: 0.9
- 2014: 4.0
- 2015: 2.5
- 2016 (Proj.): 0.3
- 2017 (Proj.): 10.3
- Unemployment rate (in percent) and other series: (table contains series of figures including 9.2; 9.1; 8.9; 8.7; 8.6; -0.3; -3.9; -0.6; 2.7; 0.4; -4.5; -1.3)
- Public debt and balance items: (table contains series including 20.0; 24.3; 37.1; 36.5; 36.7; -64.8; -74.8; -83.8; -71.8; -72.5; -72.4)
- External and reserve indicators include series such as 13.3; 16.2; 12.1; 78.1; 91.0; 96.4; 84.0; 84.6; 84.5; 79.0; 78.8; 80.3; 79.8; 78.9; 106.0; 104.8; 106.6; 106.7; 27.0; 26.1; 26.4; 26.2; 25.9; 9.5; -10.5; 2.2; 2.6; -18.9; -6.3; -3.4; -1.6; 1.6; 4.3; 4.4; 3.0; 249.5; 219.5; 267.7; 269.3; 279.2; 302.1; 2.9; 91.9; 77.0; 96.3; 91.4; 94.7; 106.1; 60.4; 58.6; 65.1; 65.0; 60.8; 57.2
- Net official reserves (in millions of US dollars): 976; 1,015; 983; 1,016; 1,051; 1,059
- Per capita GDP (in US dollars): 25,157; 25,294; 25,967; 26,025; 26,290; 26,807
- Per capita GDP (change in percent): 7.5; -4.7; -4.9; -2.1; -1.9
- Sint Maarten is part of the Kingdom of the Netherlands and does not have a separate quota.
Press Release No. 16/380 — August 22, 2016 — IMF Communications Department