The Netherlands Antilles: Economic Situation and Financial Sector Environment (2002)

Overview

The Netherlands Antilles (NA) has undergone significant changes since its dissolution into three separate countries: Aruba, Curaçao, and Sint Maarten. This report provides an assessment of the NA’s economic situation, financial sector environment, and other relevant aspects in 2002.

Economic Situation

• The NA economy experienced a prolonged recession from 1997 to 2000, with real GDP declining by 12% over this period.
• Modest growth was observed from 2001 to 2002, with an estimated - percent growth in 2001 and - percent growth in 2002.
• Private investment increased by 20%, air travel capacity expanded, and the offshore sector showed signs of recovery.

Public Finances

• The general government deficit rose sharply to a historical high of 5.5% of GDP in 2001.
• The central bank provided net credit to the government equivalent to 1% of GDP to help eliminate payment arrears.

External Accounts

• The current account deficit stood at an estimated 4.75% of GDP, slightly below the average since 1995.
• The offshore sector’s contribution to the current account deficit increased significantly.

Financial Sector Environment

• The NA has a well-developed and well-functioning legal and regulatory framework for financial sector supervision.
• Key Institutions
  • Bank of the Netherlands Antilles (BNA) is fully responsible for financial sector oversight and combines banking, insurance, pension fund, and mutual fund supervision.
• Regulatory Compliance
  • The laws and regulations are broadly compliant with international standards on:
    • Banking supervision
    • Insurance supervision
    • Anti-money laundering/combating the financing of terrorism (AML/CFT)
    • Investment institution supervision

Other International Assessments

• The NA was classified as a jurisdiction “generally perceived as having effective AML/CFT measures in place” by the Financial Stability Forum.
• The NA committed to implementing the OECD’s Common Reporting Standard for exchange of tax information, which includes requirements for:
  • Customer due diligence
  • Reporting unusual transactions

Conclusion

The report presents a mixed picture of the NA economy and financial sector environment. While there are signs of economic recovery and a well-developed regulatory framework, concerns remain about public finances and the need for greater disclosure in the business community to comply with international standards.