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Front Matter Page

IMF Country Report No. 19/23

January 2019

KINGDOM OF THE NETHERLANDS—CURAÇAO AND SINT MAARTEN

2018 ARTICLE IV CONSULTATION DISCUSSIONS— PRESS RELEASE AND STAFF REPORT

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2018 Article IV Consultation discussions with the Kingdom of the Netherlands—Curaçao and Sint Maarten, the following documents have been released and are included in this package:

  • A Press Release.
  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on a lapse-of-time basis on January 15, 2019, following discussions that ended on November 9, 2018, with the officials of the Kingdom of the Netherlands—Curaçao and Sint Maarten on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on December 21, 2018.
  • An Informational Annex prepared by the IMF staff.

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

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© 2019 International Monetary Fund

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December 21, 2018

KINGDOM OF THE NETHERLANDS— CURAÇAO AND SINT MAARTEN

STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION DISCUSSIONS

Key Issues

Context. Weak growth and underlying structural vulnerabilities persist in both Curaçao and Sint Maarten. Worsened macroeconomic conditions—reflecting the spillovers from one of Curaçao’s largest trading partners and the devastation from Hurricanes Irma and Maria in Sint Maarten—make the need for policy adjustment and structural reforms aimed at ensuring fiscal sustainability, enhancing competitiveness, strengthening investor confidence, and developing capacity more urgent.

Outlook and risks. The economic contraction is expected to continue in 2018 in both Curaçao and Sint Maarten, before the economies return to growth in 2019. Growth will pick up slowly over the medium term but remain subdued, with risks mainly on the downside. The union’s current account deficit, which has widened in recent years, is expected to remain elevated.

Policy recommendations. In Curaçao, policies should focus on ensuring fiscal sustainability and boosting the economy’s potential output. In Sint Maarten, a speedy and sustainable recovery from the 2017 hurricanes remains a key priority, including the urgent need to prioritize the reconstruction projects, cut costs, and seek additional funding. For both countries, it is critical to strengthen the fiscal frameworks and increase fiscal resilience. Structural policies should focus on lowering costs of doing business and supporting investment. Both fiscal consolidation and structural reforms to enhance competitiveness would also help safeguard external stability. Governance and financial sector oversight should be further strengthened. Data quality and provision should be improved as significant data gaps hamper surveillance. Progress on implementing policy recommendations from the 2016 Article IV Consultation discussions has been mixed: while actions are being taken to strengthen the AML/CFT regime and improve tax administration, other areas, such as improving the business climate and strengthening the fiscal framework, remain largely unaddressed.

Approved by:

Patricia Alonso-Gamo (WHD) and Martin Sommer (SPR)

Mission team: Lusine Lusinyan (head), Atsushi Oshima, Caroline Flodberg, Paula Cifuentes Henao (all WHD), and Anna Ter-Martirosyan (SPR). Dmitriy Kovtun (WHD) and Richard Doornbosch (OED) joined the meetings in Sint Maarten and the concluding meetings. Heidi Canelas (WHD) and Kadir Tanyeri (ITD) provided valuable assistance and excellent collaboration. Mission dates: October 25–November 9, 2018.

Contents

  • CONTEXT: A UNION AT A DIFFICULT JUNCTURE
  • RECENT ECONOMIC DEVELOPMENTS
  • A. Curaçao
  • B. Sint Maarten
  • C. The Monetary Union
  • OUTLOOK AND RISKS
  • POLICY ISSUES
  • A. Fiscal Policy: Strengthening Fiscal Frameworks, Ensuring Fiscal Sustainability, and Building Resilience
  • B. Enhancing Potential Growth and Competitiveness
  • C. Safeguarding External Stability
  • D. Reinforcing Financial Sector Oversight
  • E. Strengthening Governance
  • F. Building Capacity and Addressing Important Data Gaps
  • STAFF APPRAISAL
  • FIGURES
  • 1. Real Sector Developments
  • 2. Fiscal Developments
  • 3. Monetary Developments
  • TABLES
  • 1. Curaçao: Selected Economic and Financial Indicators, 2013–23
  • 2. Curaçao: Government Operations, 2013–23
  • 3. Sint Maarten: Selected Economic and Financial Indicators, 2013–23
  • 4. Sint Maarten: Government Operations, 2013–23
  • 5. Curaçao and Sint Maarten: Balance of Payments, 2013–23
  • 5a. Curaçao: Balance of Payments—Current Account, 2013–23
  • 5b. Sint Maarten: Balance of Payments—Current Account, 2013–23
  • 6. Curaçao and Sint Maarten: Monetary Survey, 2010–17
  • 7. Curaçao and Sint Maarten: Financial Soundness Indicators, 2010–17
  • ANNEXES
  • I. Implementation of the Recommendations of the 2016 Article IV Consultation Discussions
  • II. External Sector Assessment
  • III. Curaçao: Potential Output Estimates
  • IV. Risk Assessment Matrix
  • V. Fiscal Framework: Current Setup and Main Challenges
  • VI. Curaçao and Sint Maarten: Social Security Schemes
  • VII. Public Debt Sustainability Analysis
  • VIII. External Debt Sustainability Analysis

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December 21, 2018

KINGDOM OF THE NETHERLANDS— CURAÇAO AND SINT MAARTEN

STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION DISCUSSIONS—INFORMATIONAL ANNEX

Prepared By

The Western Hemisphere Department

(In consultation with other departments)

Contents

  • FUND RELATIONS
  • STATISTICAL ISSUES
  • COLLABORATIONS WITH OTHER INTERNATIONAL FINANCIAL INSTITUTIONS

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Press Release No. 19/17

FOR IMMEDIATE RELEASE

January 25, 2019

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