Financial Crime World

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The Antillean Economy

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Fiscal Front

The government is facing a budget deficit of NAf.160 million (3.6% of GDP) for the year 2000. Compared to the previous year, government revenues have increased due to higher tax revenues.

  • This increase resulted from the rise in turnover tax rates and measures to improve tax assessment and collection.
  • On the other hand, expenditures have also increased mainly because the government had to pay part of the claims related to the Parker-guarantee to a foreign financial institution.

Agreement with the IMF

The NAf.160 million budget deficit equals the target agreed upon with the IMF in the Memorandum of Economic Policies signed on September 15, 2000. This program contains measures to reduce the budget deficit, flexibilize labor and product markets, and promote trade liberalization.

  • Targets for credit extension and foreign exchange reserves are also included in the program.
  • As a result of the agreement with the IMF, the Dutch government has made available a substantial amount of liquidity support in 2000. The release of these funds is conditional on progress made in implementing policy measures.

Economic Outlook

No economic recovery is expected for 2001, as economic activity is expected to drop due to reduced public expenditures and private consumption.

  • Public expenditure cuts are aimed at reducing the budget deficit by 50%.
  • Private consumption will also decline due to continued migration, a reduction in civil servants, and a freeze on government salaries.
  • However, private investment is expected to increase due to large investment projects in the tourism sector and at the Isla refinery.

Inflation

The inflation rate accelerated from 0.8% in 1999 to 5.1% in 2000, mainly due to increased turnover tax rates.

  • The sharp increase in oil prices and inflation at main trading partners also contributed to the higher price level.
  • The tourism industry is currently facing a difficult period with slow stay-over tourism and an increase in cruise tourism not able to compensate for this.

Tourism Industry

The decline in stay-over tourism, particularly for Curacao and Bonaire, is related to the weak Euro making our islands more expensive for European visitors.

  • However, the average length of stay and average amount spent on the islands have increased slightly, dampening the effect of the drop in the number of visitors.
  • The tourism industry is expected to improve as room capacity will be restored in St. Maarten, with positive projections for Curacao due to investment projects like Brionplein Hotel and Kura Hulanda.

Conclusion

The Antillean economy has been going through a deep recession during the past few years, with the financial crisis spreading throughout the entire economy.

  • The only way out of this negative spiral is to tackle the financial problems of the government.
  • The government has made progress in implementing the policy program agreed upon with the IMF, but some delays have surfaced during the last two months.
  • A reduction in financial needs and gradual restoration of confidence will lay a solid basis for sustainable economic growth, creating better prospects for jobs and improved living standards.