Country Report Netherlands Antilles June 2009

Outlook for 2009-10

The January 1st 2010 deadline for the dissolution of the federation of the Netherlands Antilles is now likely to be put back by up to a year. This raises the possibility of fresh elections taking place and a new opposition-controlled government for the Netherlands Antilles taking power prior to completion of the transition process. Such a development would further complicate the dissolution process and would be likely to lead to fresh frictions with Dutch authorities. Debt forgiveness by the Dutch government in exchange for the establishment of a balanced current budget rule and fiscal supervision has passed a first hurdle and will continue. Under the transition agreement, Curacao and St Maarten will become fully self-governing, except in matters of defence, foreign policy and judicial and financial affairs, which will remain the responsibility of the Dutch government. Bonaire, St Eustatius and Saba are to become Dutch municipalities.

Following an easing of growth in 2008 to an estimated 1.9%, the Economist Intelligence Unit now expects the economy to contract slightly in 2009, as the impact of falling global demand hits trade and tourism, and as investment inflows fall in the context of the global financial crisis. However, the recent weakening of the US dollar (to which the guilder is fixed) will help to support tourism, although overall tourism demand will still weaken. The reduction of public debt obligations will place a floor under the contraction, as it will allow some room to implement countercyclical measures.

The political scene

Curacao has voted in favour of transition to independence, but the lack of an overwhelming majority in favour has boosted the opposition, which continues to campaign against the agreement in an effort to wrest greater powers from the Dutch government.

Economic policy

The Dutch approval of island budgets has paved the way for debt forgiveness to continue, boosting the fiscal position. Money transfer services are to be more tightly controlled.

The domestic economy

Tourism has held up well but the global recession is impacting income and investment in the sector. Oil refining activities are depressed by softer prices and lower volumes. GDP growth slowed markedly in the final months of 2008.

Foreign trade and payments

The current-account deficit will widen in 2009 according to official projections, although debt relief measures will provide some support through a boost to the capital-account balance.

This report covers the following industry codes:
SIC Code: 60;70;1
NAICS Code: 52;72;11