Country Report Netherlands Antilles December 2008

Outlook for 2009-10

A deadline of January 1st 2010 has been agreed for the dissolution of the federation of the Netherlands Antilles, and progress on reaching agreement on some of the outstanding issues that have previously held up the transition process remains halting. The accord envisages that Curacao and St Maarten will become fully self-governing, except in matters of defence, foreign policy and judicial and financial affairs, which would be the responsibility of the Dutch government. Bonaire, St Eustatius and Saba are set to strengthen their links with the Netherlands, by gaining a new status equivalent to that of Dutch municipalities. However, there remains a risk that potential political changes in the islands might cause further delays or changes. GDP growth is forecast to ease in 2008, to 1.7%, with growth dipping as investment and consumption fall in the context of a worsening global economic environment and still-high domestic inflation. The appreciation of the US dollar (to which the guilder is fixed) will act as a drag on tourism arrivals in the islands. A sharper fall in growth, and possibly return to recession, is forecast for 2009-10 as investment growth falls and tourism demand eases further.

The political scene

Early optimism about the newly-agreed timetable for the break-up of the Federation of the Netherlands Antilles has faded, and there are now serious doubts about the prospects for a smooth transition. Political crises have developed in Bonaire and in St Maarten. In Bonaire the constitutional affairs commissioner has resigned because of concerns over the way the transition was being handled, and in St Maarten the ruling Democratische Partij (DP) has lost its majority on the island council, sparking fears of a change in local government. A Dutch database plan has been scrapped following protest from the Netherlands Antilles and Aruban governments.

Economic policy

Supervision of public-sector budgets has been approved, leading the way for debt cancellation and the phasing out of Dutch financial assistance.

The domestic economy

GDP growth remained sluggish in the second quarter, with a net negative contribution from the external sector offset by firm growth in private-sector investment and consumption. Hurricane Omar hit St Maarten in October, damaging beach resorts. Rising imports widened the current-account deficit in the second quarter.

This report covers the following industry codes:
SIC Code: 59;70;49;60;10
NAICS Code: 44;72;22;52;212