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International Monetary Fund. Western Hemisphere Dept.

revenue and contain expenditure. In Sint Maarten, the hurricanes widened the primary fiscal deficit excluding Trust Fund operations to 4 percent of GDP in 2018, but it declined to 0.8 percent of GDP in 2019 on account of economic recovery. The external position of the Union worsened since 2016. The current account deficit (CAD) widened from 15.2 percent of the union GDP in 2017 to an estimated 21.8 percent of GDP in 2019 mainly because of a larger CAD in Curaçao, where imports increased significantly due to spillovers from Venezuela. Despite double-digit CADs, the

International Monetary Fund. Western Hemisphere Dept.
This 2019 Article IV Consultation focuses on Curaçao and Sint Maarten’s near and medium-term challenges and policy priorities and was prepared before coronavirus disease 2019 became a global pandemic and resulted in unprecedented strains in global trade, commodity and financial markets. The fiscal position in Curaçao improved in the past two years, in part due to implemented fiscal measures. Both Curaçao and Sint Maarten would benefit from introducing a Fiscal Responsibility Framework. It could incorporate a central government debt ratio as a long-term anchor and operational rules calibrated to meet it. The report suggests that risks in the financial sector need to be addressed as a matter of priority. The authorities should develop a strategy for addressing financial sector vulnerabilities with the objective of preserving financial stability while minimizing fiscal costs. Significant strengthening of supervision and a complete overhaul of the bank resolution framework are also urgently needed. An across-the board improvement in the governance framework should be a key priority in both countries. Vulnerabilities in the financial system point to the need to strengthen governance in the financial sector.
International Monetary Fund. Western Hemisphere Dept.

position of the Union worsened in the past two years ( Table 7 ). The current account deficit (CAD) widened from 15.2 in 2017 to an estimated 21.8 percent of the union GDP in 2019, mainly because of a larger CAD in Curaçao, where imports increased significantly due to spillovers from Venezuela ( Annex II ). Despite double-digit CADs and the end of foreign exchange inflows related to the 2010 debt relief, the pressure on international reserves has been relatively mild as they declined from 4.4 to 4 months of imports of goods and services between 2017 and 2019. The

International Monetary Fund. Western Hemisphere Dept.

declined to 81 percent of GDP in 2019. 1 In 2019, Curaçao was a net creditor with an NIIP of 176 percent of GDP and Sint Maarten was a net debtor with an NIIP of -138 percent of GDP ( Annex IV , Figure 1 ). External assets in Curaçao amounted to US$10.6 billion (340 percent of GDP), with about US$6.9 billion (222 percent of GDP) in portfolio investments held by non-bank financial institutions (e.g. insurance companies and pension funds). The reported NIIPs pose questions about data quality as the persistent CAD in Curaçao is not consistent with its steady position as a

International Monetary Fund. Western Hemisphere Dept.
The COVID-19 pandemic inflicted another major shock on the economies of Curaçao and Sint Maarten, which followed category 5 hurricanes in Sint Maarten in 2017 and the spillovers of the Venezuelan crisis on Curaçao. Despite the substantial response measures financed by The Netherlands, the economic contraction in 2020 was severe.