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