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1 CE TRALE BANK VA CU RACAO E SI T MAARTE --...,.foll:lfioiit-....._. Tel. (599 9) Fax (599 9) , info@centtalbank.cw De Griffier van het Parlement van Curac;:ao De heer mr. S.R. Cijntje Wilhelminaplein 4 Curac;:ao Willemstad, 7 september 217 Uwkenmerk: Ons kenmerk: Onderwerp : aanbieding jaarverslag CBCS 216 Geachte heer Cijntje, Conform het Centrale Bank-statuut voor Curac;:ao en Sint Maarten stelt de Centrale Bank van Curac;:ao en Sint Maarten (CBCS) jaarlijks een verslag op omtrent het door de Bank gevoerde financieel-economische beleid van het afgelopen jaar. De directie van de CBCS heeft het genoegen u hierbij het verslag over het jaar 216 ter kennisneming aan te bieden. Hoogachtend, President a.

2 9/7/217 Annual Report216 Centrale Bank van Curac;:ao en Sint Maartcn September 7, 217 Contents: I. Economic Developments IL Monetary Developments Ill. Economic Outlook 1

3 "' I 9/7 /217 Economic Developments Real Sector Developments in the monetary urn on ~1na -1.os1J1-864-~ I -1,3s.g (~urrcnt account balance ~in min NAf.~I ;hangc in groos foreign reserves_of th GGG entral bank min NAf. *- sign means an inmase 2

4 9/7/217 Macro-economic key figures: a~ Re. GDP Consumer pri<t' l n< mplo~ men! r.11e Cur.1.,:.1 Sim '.\l,1arten o.a. 6.2%.\ruh.1 -O.S% --.2"..5% -.9'lo.a. n.a. l nited St.lies u. t 'r.o \' l 'lll'zuel.1-5-7% 1 4-2% -9.l!"o 1-1."a 116.2% ll'!o lu 121.7% '!o IO 7.5 to 7.4"; l\;etherl.mds *Sint Maarten daa refer to 'l. 2.2" % 6.9'! 6. Economic development 4 1 ~ I.. Real GDP in Curayao contracted by 1.% in 216. Zero inflation rate (.%) because the drop.. tn energy pnces was offset by the rise in food prices. -2% -1.% Real GDP - Inflation T rend (Real GDP) 3

5 9/7 /217 4.% 3.% 2.%.% +----~ ~---~---~-~-~ -l.% Lnflation Core inflation e..xcluding electricity prices Core inflation excluding fuel prices - Core innatioo excluding electricity and fuel prices.9%.4%.% Development in core inflation I.. Core inflation is the long-run trend in inflation. By measuring core inflation as inflation excluding electricity and fuel prices, it seems that the zero inflation (.%) in 216 becomes an inflation of.9%. GDP by expenditure ofc~ tul'e ol which: of which: = 'ture S 11m: CBCT estimates; real pemntage changes. O..l -LO 4

6 ~ ; 9/7/217 Sectornl petfonnance inc~ine6 I. Decline in manufacturing sector: Decline in refining activities by the Isla refinery. Decline in ship repair activities.. Decline in restaurants & hotels sector: ill. IV. Decline in stay-over tourism. Decline in cruise tourism. Decline in wholesale & retail trade sector: Decline in free-zone activities and tourism spending. Decline in transport, storage & communication sector: Decline in air and sea transport. Sectornl petfonnance in C~inE6<an.> V. Decline in financial intermediation sector: Declineindomesticfinancial services. Decline in international financial services. VI. Growth in construction sector: Increase in private and public investments. V. Growth in utilities sector: Increase in water and electricity production. 5

7 9/7 /217 Economic development Sint Maarten 5 1 4% 3 1 2% I.. Real GDP shrank by.1% in 216. Consumer price inflation fell to.1 % in 216 due to effects of lower international fuel prices. 1 1 % -1 <%.1 % Real GDP - Inflation Trend (Real GDP) GDP by expenditme of Sint Maarten - Investment Consum ti.on "tute S 11rn: CBCT rslimales; real pernntage changes. o. 6

8 9/7 /217 Sectornl performance in SintMaarteninE6 I. Decline in the wholesale & retail trade sector: Contraction in both domestic consumption and tourism spending.. Negative turnaround in the construction sector: Decrease in building material imports. Slowdown in private investment I. Negative turnaround in the real estate, renting & business activities sector: Decline in cruise tourism affected related businesses. Disappointing results in timeshare sector. Sectornl perfonnance in Sint Maartenin E6 (an.) IV. High growth in manufacturing sector: Increase in yacht repair activities due to more yachts visiting Sint Maarten. V. Muted growth in transport, storage & communication sector: Slight increase in harbor-related activities. Growth in airport-related activities. VI. Slower growth in restaurants & hotels sector: Increase in stay-over tourism. Sharp decline in cruise tourism. 7

9 9/7/217 Economic Developments Labor market Unemployment rate 25% 19.8% 193% Sources : lmf, Wodchank. Department of Stlltistics Stnt Murtcn, Central Buccauo f St2tistics Curai;ao and Centnle Bank van Aruba srnt Murtcn data ccfe:rto 217._..Aruba data rcferto

10 9/7/217 Labor productivity c~ L IL On average, labor productivity has contributed negatively to output growth over the period In 216, labor productivity declined by -5.3% compared to -3.8% in Labor productivity Employment & GDP &nnomic Developments Public Sector 9

11 9/7/217 Main developments Cura~ao L Based on available data, the deficit on the current budget of the Cura<;ao government widened by NAf.36.5 million to NAf.38.1 million in I. The government issued a NAf.59.1 million bond that was allocated entirely to the Dutch State Treasury Agency (DSTA). Some revenues and expenditures have yet to be processed for the year 216 which are expected to turn the budget deficit around into a surplus. BudgetdevelopmentC~ 2,5 2,25 2, , 4. = e - 1,15 2 :;j z 1, ,25-4 2, , ~ Budget balance (r.b.s.) - Total expenditures - Total revenues -6 1

12 9/7/217 Public debt and GDP: C~ 6, 5, c 4, e = 3,ooo < z 2, 5,642 5,586 5% 44% 46% 45% 4% ,545 35% 3% 1, 25% Total public debt - G DP - Debt-to-GDP ratio (r.h.s.) 2% Main developments Sint Maarten I. Sint Maarten's government recorded a surplus of NAf.26.4 million on its current budget in 216, an improvement compared to the deficit of NAf.18.4 million in I. The government will allocate NAf.2. million of this surplus for the compensation of deficits incurred in previous years. The primary balance recorded a surplus of 2.1 % of GDP in 216, up from the deficit of.3% of GDP in

13 9/7/217 Budget development SintMaarten = 45 = e 4 ~ z Budget balance (r.h.s.) - Total expenditures Total re\'cdues Public debt and GDP: SintMaarten - 2, 1,94 1,94 5% 1,75 45% 1, % 36% % ~ 1,25 35% e 1, 3% ~ % 5 2% 25 15% 1% Total public debt - GDP - Debt-to-GDP ratio (r.b.s.) 12

14 9/7/217 Tax burden as percentage of GDP 3% 25% - 2% 15%,_ % 5% % Sources: lntentional Moocury Fund, Centrale Bank van Aruba. andcentrale Bank van Cu~aocn Sinr Maarten estimates Tax burden and social rontributions 6% 5% 4% 3% 2% 1% % - Tax burden as% of GDP - Social contributions as % of GDP - Tax burden and social contributions as% of GDP - Average Sources: FinancW Management Repon of the gpvemment of Cuw;ao. Centnle Bank van c.u.n.~aoen Sint M~arten, and OECD Cuw;aosr:arted cqx>rtingsocial securitycontributionsdat:it as of January

15 9/7/217 Economic Developtnents External Sector Main developnients 2fil6 I. Widened current account deficit. IL Increased external financing. I. As foreign financing was more than sufficient to cover current account deficit, gross official reserves increased. 14

16 9/7 /217 Ba1anre of payments (transaction basis, NAf. mln) Current.u:count - 1.l33, ,o35. C.1pit.1l.1ccmmt t -7.t 3. Extern. fin.mcin~ 1,7. 1, , Current account balance - External financing of the private sector 15

17 9/7 /217 lntemational financial services 7% Tomilm Contribution to foreign exch~ income* in 2 and % 216 ftreezone Merchandise (C~ao) 2 lntemational financial services 18% O ther services 11% e *Income from the export of goods and services. Contribution to foreign exch~ income* in 2 and 216 (Sint Maarten) lntemational financial 216 O ther services lntemational 7 % """\. financial \. 2 Merchandise 1% *Income from the export of goods and services. 16

18 9/7 /217 Tourism sector 2, 1,6 1,675 1,534 ~ 1,2 ] :;;! z 8 1, Curacao Sint Maartcn futernationalfinancial sector 45 c 3 ~ :;;! z Net operational income Profit tax BRK windfall 17

19 9/7/217 ~fee (Cura~ao) c: ~ e 4 ~ z Mondilyimport coverage ~ c: 3 -i-~~~~~~~~~~~~~~~~~--i--~~~~~~~~~~~...,ir;;;:::~~~~~~~~~~ ~ 2 51' 51'V 51"> ~ 51'> \:lb <$- 51' 51"1...,,,,.,,..."' \$ \$ 'f \""Q \$ \"""' \$ \$ \$ \"""' '"' ~ ~ ~ ~ ~ ~ '"' '" 'I 'I 'I 'I 'I 'I - Import coverage norm Import coverage corrected for standing subscription - Import coverage,1o 18

20 9/7 /217 Monetaty Developtnents Main monetary developments I. Decelerated growth in money supply.. During first half of 216, increase in net foreign assets, moderated by decline in net domestic assets. I. During second half of 216, increase in net domestic assets, mitigated by a decline in net foreign assets. 19

21 9/7 /217 Money supply 5, g = a 4,ooo ~ z 3,7fr7 4,186 4,156 3, Net domestic assets Net foreign assets Private credit extension 7, 6, c 5, 4, ~ ~ z 3, 2, 1, b <;;"' '\,b,b,b,b,b,.. ~ d # a: ~o ~ "'~ - Loans to the private sector Monetary Union - Loans to the private sector Sint Maartcn - Loans to the private sector Cu.rac;ao 2

22 9/7 /217 Monetatypolicy stancein~6 D uring first quarter of 216: I. Reserve requirement was kept at 18.% (since June 214) IL I. As of March 216, Banks under the emergency rule are exonerated &om the reserve requirement. At the bi-weekly auctions, higher amounts of certificates of deposit were auctioned against various maturities combined with higher interest rates. Monetaiypolicy stancein~6 As of the second quarter of 216: I. Reserve requirement was kept at 18.% (since June 214). At the bi-weekly auctions, the Bank aimed only at the refinancing of maturing CDs. 21