Country Report Netherlands Antilles March 2009

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 is expected to speed up in the forecast period, although further delays remain a possibility. Breakthroughs have been made on arrangements for debt forgiveness by the Dutch government in exchange for the establishment of a balanced current budget rule and fiscal supervision. 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. Following an easing of growth in 2008 to an estimated 1.7%, growth is forecast to turn negative 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. The appreciation of the US dollar (to which the guilder is fixed) will act as a further drag on European tourism arrivals in the islands. A return to low growth, at best, and possibly continued recession, is forecast for 2010, depending in part on global sentiment. However, the removal of public debt obligations will place a floor under the contraction, allowing the government some breathing space to implement countercyclical measures.

The political scene

Progress has been made toward the constitutional transition, with agreement reached on the timetable and on the resolution of some of the public debt issues. However, the political opposition in Curacao continues to campaign against the agreement as it stands, arguing for great future autonomy.

Economic policy

With the agreements reached, the process of cancelling the federation's public debt, which is being assumed by the Netherlands, has started. With all the islands heavily dependent on tourism, the global recession is expected to deal a heavy blow to the Netherlands Antilles island economies in 2009.

The domestic economy

Indications are that GDP growth remained sluggish in the second half of 2008. Rising imports widened the current-account deficit in the third quarter of theyear.

This report covers the following industry codes:
SIC Code: 49;70;1;60
NAICS Code: 22;72;11;52