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Netherlands : IMF Executive Board Concludes 2016 Article IV Consultation Discussions with the Kingdom of the Netherlands-Curaao and Sint Maarten.

On July 27, 2016, the Executive Board of the International Monetary Fund (IMF) concluded the 2016 Article IV Consultation discussions with Curaao and Sint Maarten, two autonomous countries within the Kingdom of the Netherlands, and considered and endorsed the staff appraisal without a meeting.

The currency union of Curaao and Sint Maarten has important strengths, including a high level of development, good infrastructure, and relatively low public debt, however, preserving these going forward will require surmounting some critical challenges. GDP per capita is already at high-income country levels, but growth is lackluster and unemployment levels are high. The fiscal situation remains relatively stable, following the debt relief in 2010, but progress on necessary fiscal and structural reforms has been slow.

For several years now, both countries have experienced stagnant growth, trailing behind regional peers. Curaao experienced modest growth in 2015 of 0.1 percent, reflecting a turnaround from the contraction of 1.1 percent in 2014. Growth in Curaao mainly reflected an increase in investment (both public and private), driven largely by the construction of the new hospital and the upgrade of road infrastructure. Meanwhile, the economy of Sint Maarten expanded by 0.5 percent in 2015, a slowdown compared to the 1.5 percent recorded in 2014. The expansion in Sint Maartens GDP mainly reflected an increase in stay-over tourist arrivals, though at a slower pace than in 2014. With the exception of the recent expansion project at the Princess Juliana International Airport, there were no major private investment in 2015, underscoring the need to boost investor confidence.

Real GDP growth in 2016 is expected to reach 0.5 percent in Curaao and 0.7 percent in Sint Maarten. For Curaao, economic activity is projected to accelerate reflecting continued economic recovery in main trading partners (especially the U.S.) and a continuation of both private and public investment projects, mostly supported by the hospital construction. Higher growth in Sint Maarten reflects expectations for higher private spending, particularly in the tourism and transportation sectors, and a moderate increase of tourism flows.

Over the medium term, growth is expected to moderately pick up to 0.9 percent and 1.3 percent for Curaao and Sint Maarten, respectively. The expansion in both countries will mainly depend on the implementation of structural reforms aimed at attracting more FDI, relaxing restrictions on hiring foreign labor, and reducing costs of doing business.

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Publication:Mena Report
Geographic Code:4EUNE
Date:Aug 23, 2016
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