Presentation Annual Report 2017 Centrale Bank van Curaçao en Sint Maarten

Annual Report 2017 Centrale Bank van Curaรงao en Sint Maarten August 27, 2018

Contents: I. II. III.

Economic Developments Monetary Developments Economic Outlook

Part I

Economic Developments Real Sector

3

Developments in the monetary union

2015

2016

2017

Current account balance (in mln NAf.)

-887.4

-1,080.8

-1,120.3

Change in gross foreign reserves of the central bank (in mln NAf.)*

-27.8

-187.5

17.6

0.5

1.4

0.3 0.4

-1.0 0.4

-1.7 -4.8

-0.5 0.3

0.0 0.1

1.6 2.2

Change private loans (%) Real GDP growth (%) Curaรงao Sint Maarten Inflation (%) Curaรงao Sint Maarten *- sign means an increase

4

Macro-economic key figures: a comparison Real GDP

Consumer prices

Unemployment rate

2016

2017

2016

2017

2016

2017

Aruba

-0.2%

1.2%

-0.9%

-0.5%

n.a.

n.a.

United States

1.5%

2.3%

1.3%

2.1%

4.9%

4.4%

Venezuela

-16.5% to -18.6%

-7.0% to -12.0%

254.4% to 258.2%

1,087.5% to 1,327.3%

12.5% to 20.6%

11.0% to 26.4%

Netherlands

2.2%

3.2%

0.3%

1.4%

6.0%

4.9%

5

Economic development Curaรงao I. II.

Real GDP in Curaรงao contracted by 1.7% in 2017.

Inflation rate increased to 1.6% because of higher food and oil prices.

2%

1.6%

1%

0.0%

0%

-1%

-2%

-1.0%

2013 Real GDP

2014

2015 Inflation

2016

-1.7% 2017

Trend (Real GDP) 6

GDP by expenditure of Curaรงao

7

2016

2017

Domestic expenditure, of which: Private sector - Investment - Consumption Public sector - Investment - Consumption

0.2 0.2 0.2 0.0 0.0 0.4 -0.4

-0.4 -0.2 0.2 -0.4 -0.2 -0.3 0.1

Changes in inventory

-0.1

-0.1

Foreign net expenditure, of which: - Export of goods and services - Import of goods and services

-1.1 -1.4 -0.3

-1.2 -0.9 0.3

Real GDP by expenditure

-1.0

-1.7

Source: CBCS estimates; real percentage changes.

Sectoral performance in Curaçao in 2017 I.

II.

III.

8

Decline in wholesale & retail trade sector • Decline in tourism and domestic spending.

• Increase in re-exports by the free zone.

Decline in restaurants & hotels sector: • Decline in stay-over tourism.

• Increase in average length of stay.

• Increase in cruise tourism.

Decline in transport, storage & communication sector: • Decline in air and sea transport.

Sectoral performance in Curaçao in 2017(cont.)

IV.

Decline in financial intermediation sector: • Decline in domestic and international financial services.

V. Decline in manufacturing sector: • Decline in refining activities.

VI. Growth in construction sector: • Increase in private and public investments.

VII. Growth in utilities sector: • Increase in water and electricity production.

9

Economic development Sint Maarten I. II.

Real GDP shrank by 4.8% in 2017.

Consumer price inflation rose to 2.2% in 2017 due to higher fuel and electricity prices and healthcare costs.

4% 2.2% 2% 0.1% 0% -0.1% -2%

-4% -4.8% -6% 2013 Real GDP

2014

2015 Inflation

2016

2017

Trend (Real GDP) 10

GDP by expenditure of Sint Maarten 11

2016 0.1 0.3 0.4 -0.1 -0.2 -0.1 -0.1

2017 -0.5 -0.3 0.2 -0.5 -0.2 -0.9 0.7

0.1

-0.9

Foreign net expenditure, of which: - Export of goods and services - Import of goods and services

0.2 -0.1 -0.3

-3.4 -8.1 -4.7

Real GDP by expenditure

0.4

-4.8

Domestic expenditure, of which: Private sector - Investment - Consumption Public sector - Investment - Consumption Changes in inventory

Source: CBCS estimates; real percentage changes.

Sectoral performance in Sint Maarten in 2017 I.

II.

III.

12

Accelerated decline in the wholesale & retail trade sector: • Contraction in both domestic consumption and tourism spending.

Dramatic negative turnaround in the restaurants & hotels sector: • Sharp declines in stay-over tourism and cruise tourism.

Negative turnaround in the real estate, renting & business activities sector: • Decline in cruise tourism affected related businesses.

• Decline in timeshare sector.

Sectoral performance in Sint Maarten in 2017 (cont.)

IV.

Negative turnaround in utilities sector: • Decrease in electricity and water production.

V. Dramatic negative turnaround in transport, storage & communication sector: • Contraction in harbor-related activities.

• Contraction in airport-related activities.

VI. Decline in financial intermediation sector.

VII. Positive turnaround in construction sector: • Increased private investments.

• Reconstruction and repair activities.

VIII. Slower growth in manufacturing sector.

13

Economic Developments Labor market

14

Unemployment rate 25% 20% 15%

14.1%

10% 6.2%

5% 0%

Sources : IMF, Worldbank, ILO, Department of Statistics Sint Maarten, Central Bureau of Statistics Curaรงao and Centrale Bank van Aruba. *Aruba data refer to 2016

15

Economic Developments Public Sector

16

Main developments Curaรงao I.

According to the December 2017 reporting, the government of Curaรงao recorded a deficit of NAf.80.2 million on its current budget in 2017, an increase by NAf.96.1 million compared to 2016.

II.

Some revenues and expenditures have yet to be processed for the year 2017 which are expected to worsen the current budget deficit to NAf.113.3 million.

III.

The government issued a NAf.60.0 million bond in November 2017 that was allocated entirely to the Dutch State Treasury Agency (DSTA).

17

Budget development Curaçao 40 15.9

20

NAf. million

0 -20

-40 -60 -80 -100

-80.2 2014

2015

2016

2017*

Budget balance *2017 figures based on the FinanciĂŤle Management Rapportage of the government of Curacao of December 2017.

18

Public debt and GDP: Curaรงao 6,000

5,587

NAf. million

5,000

5,582 50%

46%

55%

50% 45%

4,000 3,000

2,545

2,806

40% 35%

2,000

30%

1,000

25%

0

20% 2014 Total public debt

2015 GDP

2016

2017

Debt-to-GDP ratio (r.h.s.)

19

Main developments Sint Maarten I.

The public finances of Sint Maarten also suffered from the passing of Hurricane Irma in September 2018. The government recorded a deficit of NAf.72.4 million on its current budget, a turnaround compared to the surplus of NAf.26.4 million in 2016.

II.

The Dutch government offered financial support for the reconstruction of Sint Maarten.

III.

Despite the worsening of the public finances, the total outstanding public debt declined.

20

Budget development Sint Maarten 40 26.4

NAf. million

20 0

-20 -40 -60 -80

2014

2015

2016

-72.4 2017*

Budget balance * Source: Voorlopige FinanciĂŤle Concernrapportage/Uitvoeringsrapportage, vierde kwartaal 2017 of the government of Sint Maarten.

21

Public debt and GDP: Sint Maarten 2,250

50%

1,914

2,000

1,864

1,750

40%

1,500 NAf. million

45%

34%

1,250

32%

35% 30%

1,000

651

750

587

25%

500

20%

250

15%

0

10% 2014 Total public debt

2015 GDP

2016 Debt-to-GDP ratio (r.h.s.)

2017 22

Economic Developments External Sector

23

Main developments 2017 I.

Widened current account deficit.

II.

External financing rose, albeit at a slower pace compared to 2016.

III.

As foreign financing was not sufficient to cover current account deficit, gross official reserves dropped.

24

Balance of payments (transaction basis, NAf. mln) 2014

2015

2016

2017

Current account

-1,085.8

887.4

- 1,080.8

-1,120.3

Capital account

23.1

-7.1

3.0

-2.7

1,414.8

801.4

1,168.7

992.7

Direct investment

128.7

278.3

241.0

628.8

Portfolio investment

787.7

588.2

373.2

323.1

Loans & credits

498.4

-62.4

569.7

52.7

Change in reserves

-459.9

-27.8

-187.5

17.6

External financing

25

Balance of payments developments (in % of GDP)

30% 20%

13.5%

10% 0% -10% -15.0%

-20% -30%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Current account balance

External financing of the private sector

26

Contribution to foreign exchange income* in 2000 and 2017 (Curaรงao)

2000

2017 International financial services 6%

Freezone 7% Other services 19%

Merchandise excl. freezone 7% Bunkering 13%

International financial services 18%

Other services 11% Freezone 17%

Transportation

7% Tourism 31%

Refining 13%

Tourism 14%

*Income from the export of goods and services.

Refining 16%

Bunkering 6%

Merchandise excl. freezone Transportation 11% 7%

27

Contribution to foreign exchange income* in 2000 and 2017 (Sint Maarten)

2017 International financial services 2%

Other services 12%

Other services 7% International

Bunkering 1% Merchandise 12%

Transportation 3%

2000

financial services 2%

Merchandise 10%

Transportation 2%

Tourism 79%

Tourism 68%

*Income from the export of goods and services.

28

Tourism sector 2,000

1,534

NAf. million

1,600

1,200

1,026

1,127 986

800

400

0 2013

2014

2015 Curacao

Sint Maarten

2016

2017 29

International financial sector

NAf. million

450

300

256

240

150

30

25

0 2012

2013

2014

Net operational income

2015 Profit tax

BRK windfall

2016

2017 30

Refining fee (Curaรงao)

700

NAf. million

600 500

460 396

400 300

200 100 0 2012

2013

2014

2015

2016

2017 31

Monthly import coverage 6 5

Months

4 3 2 1 0

Import coverage norm

Import coverage corrected for standing subscription

Import coverage

32

Part II

Monetary Developments

33

Main monetary developments I. II.

III.

Money supply increased in 2017.

Monetary expansion reflected an increase in net foreign assets, moderated by a slight decline in net domestic assets.

Moderate increase in domestic credit, but credit to private sector remained subdued.

34

Money supply 6,000 4,990

NAf. million

5,000

4,377

4,186 3,753

3,787

4,000

3,699

3,000 2,000 1,000 0 2012

2013

2014

Net domestic assets

2015 Net foreign assets

2016

2017 35

Private credit extension 7,000 6,000 5,000 4,000 3,000 2,000 1,000

0

Loans to the private sector Monetary Union Loans to the private sector Sint Maarten

Loans to the private sector Curaรงao

36

Monetary policy stance in 2017

37

I.

Reserve requirement was kept at 18.00% (since June 2014).

II.

Pledging rate increased by 50 basis points to 1.50%.

III.

At the bi-weekly auctions, the Bank aimed at a gradual reduction in outstanding CDs. Lower amounts of certificates of deposit were offered than matured.

Part III

Economic Outlook

38

Expected developments in the monetary union in 2018 and 2019

2016 Current account balance (in mln NAf.) Change in gross foreign reserves of the central bank (in mln NAf.)* Real GDP growth (%) Curaรงao Sint Maarten Inflation (%) Curaรงao Sint Maarten *- sign means an increase ** projection CBCS.

2017

2018**

2019**

-1,080.8 -1,120.3 -1,624.8 -1,767.6

-187.5

17.6

-29.5

-50.0

-1.0 0.4

-1.7 -4.8

-1.6 -8.3

0.4 0.6

0.0 0.1

1.6 2.2

1.9 2.7

1.8 2.5 39

Expected developments in Curaçao in 2018 I.

II.

Curaçao’s economy is projected to contract by 1.6% in 2018 due to declines in net foreign and domestic demand.

Consumer price inflation is expected to increase to 1.9% because of a projected increase in international oil and food prices.

40

Expected developments in Sint Maarten in 2018 I.

II.

41

Sint Maarten’s real GDP is estimated to contract by 8.3% in 2018, driven by a sharp decrease in net foreign demand.

Inflationary pressures are expected to rise to 2.7% due to increased insurance premiums and higher building material prices.

Expected developments in Curaçao in 2019 I.

II.

Curaçao’s real GDP is projected to grow by 0.4% in 2019 because of increases in net foreign and domestic demand.

Inflationary pressures are expected to ease slightly to 1.8% because the drop in international oil prices will be mitigated by an increase in food prices.

42

Expected developments in Sint Maarten in 2019 I.

II.

43

Sint Maarten’s real GDP is estimated to grow by 0.6% in 2019, driven mainly by higher domestic demand.

Inflationary pressures are expected to ease slightly to 2.5% due to a decrease in international oil prices.

Projection balance of payments 2018 - 2019 (transaction basis, NAf. mln)

2016

2017

2018**

2019**

Current account

-1,080.8

-1,120.3

-1,624.8

-1,767.6

Capital account

3.0

-2.7

180.4

364.3

External financing

1,183.8

1,004.5

1,335.0

1,348.6

Change in reserves

-187.5

17.6

-29.5

-50.0

44

THEEND