Country Report Netherlands Antilles June 2008

Outlook for 2008-09

The federation of the Netherlands Antilles will not be disbanded on December 15th 2008, as previously scheduled. The date now appears likely to be moved to January 2010, when the next federation-wide elections are due to be held. The deadline will be missed owing to slow progress on talks between the five islands and with the Dutch government, and growing opposition within the Netherlands Antilles over the terms of the deal. The accord envisages that Curacao and St Maarten will become fully self-governing, except in matters of defence, foreign policy and judicial and financial matters, which would be the responsibility of the Dutch government. The three smaller islands—Bonaire, St Eustatius and Saba—will strengthen their links with the Netherlands, through gaining a new status that is equivalent to that of Dutch municipalities. Steady growth in tourist arrivals is expected to continue, particularly from the growing South American market, helping the retail, free-zone, hotel and restaurant sectors to drive growth of between 2% and 3% per year in 2008-09.

The political scene

The deadline for the break-up of the federation will be missed, and the allocation of assets and liabilities between the islands is set to be complex.

Economic policy

Although the islands took on little fresh external debt in 2007, the public debt ratios rose owing to euro appreciation against the dollar,

The domestic economy

Growth has remained solid, by historical comparison, but high inflation is threatening to erode demand.

Foreign trade and payments

The current-account deficit widened in 2007 to a record 16.2% of GDP.