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Annual Report2013

Centrale Bank van Curaçao en Sint Maarten

August 18, 2014

1

Outline presentation

•Developments in:- Real sector- Public sector- External sector- Monetary and financial sector

•Outlook for 2014 & 2015

2

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Real sector

3

4

Developments in the monetary union

2011 2012 2013

Current account balance (in mln NAf.) -1,466.5 -1,388.8 -1,155.8

Change in gross foreign reserves of the

central bank (in mln NAf.)*-48.4 277.5 47.9

Change private loans (%) 5.4 4.8 -1.0

Curaçao 8.9 8.6 -0.6

Sint Maarten -2.4 -4.7 -1.9

Real GDP growth (%)

Curaçao 0.6 -0.1 -0.8

Sint Maarten -1.5 1.5 0.9

Inflation (%)

Curaçao 2.3 3.2 1.3

Sint Maarten 4.6 4.0 2.5

*- sign means an increase

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1.9%

3.9% 0.6% -2.4%

1.5%

40.6%

2.1%

1.3% 21.1%

-1.2% -0.8% 2.5% 2.5% 6.7%5.3%

9.6%

8.1%

7.8% 7.5%

7.4%

7.6%

5.6%

2.8%

-1.3%Aruba

United

States

Venezuela

Netherlands

5

Macro-economic key figures: a comparison

Real GDP Consumer prices Unemployment rate

2012 2013 2012 2013 2012 2013

6

Sectoral performance in Curaçao in 2013

• Decline in transport, storage & communication

sector.

- Drop in air transport.

- Drop in sea transport.

• Expansion in the manufacturing sector.

- Increase in ship repair activities.

- Activity growth at the refinery.

• Slowdown in restaurants & hotels sector.

- Slower growth in stay-over tourism.

- Increase in cruise tourism.

• Decline in wholesale & retail trade sector.

- Decline in free zone activities.

- Drop in domestic demand.

• Decline in financial intermediation sector.

- Decline in domestic financial services.

- Decline in international financial services.

• Decline in construction sector.

- Less private investments.

- More public investments.

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Economic development Curaçao

-0.1%-0.8%

3.2%

1.3%

-1%

0%

1%

2%

3%

4%

2009 2010 2011 2012 2013

Real GDP Inflation

• Real GDP in Curaçao contracted

by 0.8% in 2013.

• Inflationary pressures eased to

1.3% as a result of lower fuel

prices.

Curaçaolabor market developments

2011 2013

Employed population 62,042 63,493

Unemployed population 6,721 9,512

Labor force 68,763 73,005

Total population 147,858 150,782

Participation rate 46.5% 48.4%

Unemployment rate 9.8% 13.0%

Youth unemployment rate 24.7% 37.2%

Source: CBS, Labor Force Survey 2013

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• Sint Maarten recorded a real GDP growth of 0.9% in

2013.

• Consumer price inflation fell to 2.5% in 2013 due to a

slowdown in food price gains and lower electricity prices.

Main developments in Sint Maarten in 2013

Sectoralperformance in

Sint Maarten in 2013

• Higher growth in the wholesale & retail trade sector.- Increase in domestic spending.- Slowdown in tourism spending.

• Growth in the construction sector.- Increase in private investments.- Increase in public investments.

• Slowdown in the restaurants & hotels sector.- Slowdown in stay-over tourism.- Slowdown in cruise tourism.

• Increase in the manufacturing sector.- More yacht repair activities.

• Decline in the transport, storage & communication sector.- Decline in harbor activities.- Growth in air transportation activities.- Slowdown in airport-related activities.

• Decline in financial intermediation sector.- Drop in the net interest income of

domestic commercial banks.

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11

Public sector

Main developments Curaçao

12

• During 2013, the government implemented a package of

fiscal austerity measures to comply with the instruction

given by the Kingdom Council of Ministers in 2012.

• Measures led to an improvement of the public finances:

• Budget surplus in 2013, following a deficit in 2012.

• Improvement in primary balance.

• Currently, the government is complying with the rules

stated in the Kingdom Act Financial Supervision Curaçao

and Sint Maarten.

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13

-154 -36

83

1,717 1,697

1,5311,564 1,661

1,614

-500

0

500

1,000

1,500

2,000

2,500

3,000

2009 2010 2011 2012 2013

NA

f. m

ln

Budget balance Total expenditures Total revenues

Budget development Curaçao

Public debt and GDP: Curaçao

14

1,858 1,943

5,605 5,633

33% 34%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

1,000

2,000

3,000

4,000

5,000

6,000

2010 2011 2012 2013

NA

f m

ln

Total public debt GDP Debt-to-GDP ratio

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8

Main developments

Sint Maarten

15

• On September 16, 2013, the government’s budget for 2013 was

signed into law.

• The government registered for the third consecutive year a budget

deficit. However, the deficit narrowed in 2013 compared to 2012.

• Primary balance became positive.

• Ongoing focus on establishing the necessary institutions for the

country of Sint Maarten.

• However, financial constraints continue to hamper this development.

16

Budget development SintMaarten

-5 -23 -5

408434 427

403 411 422

-40

60

160

260

360

460

2011 2012 2013

NA

f. m

ln

Budget balance Total expenditures Total revenues

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Public debt and GDP: Sint Maarten

17

* CBCS estimate

353 426

1,760 1,824

22%

26%

0%

5%

10%

15%

20%

25%

30%

35%

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2010 2011 2012 2013*

NA

f m

ln

Total public debt GDP Debt-to-GDP ratio

18

5 year government bond yield(31 December 2013)

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Curaçao & Sint Maarten

Trinidad and Tobago

The Bahamas

Dominican Republic*

Barbados Jamaica

*Data refers to 1 July 2014.

Source: CBCS & Bloomberg

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19

1-year Treasury bill yield (2013)

0%1%2%3%4%5%6%7%8%

20

External sector

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Main developments 2013

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• Narrowing of current account deficit.

• Decline net capital transfers from abroad.

• Increase in external financing albeit at a slower

pace than in 2012.

• As foreign financing was not sufficient to cover

current account deficit, gross official reserves

declined.

Balance of payments

22

47.9277.5-48.4- 27.4Change in reserves

964.0941.11,318.3155.3External financing

62.269.7123.11,200.8Capital account

- 1,155.8- 1,388.8- 1,466.6- 1,427.8Current account

2013201220112010

(transaction basis, NAf mln)

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Balance of payments developments (in % of GDP)

23

-21.2%-19.4%

-15.9%

19.0%

13.5%

13.0%

-30%

-20%

-10%

0%

10%

20%

30%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Current account balance External financing to the private sector

Contribution to foreign exchange income* in 2000 and 2013

(Curaçao)

Freezone17% Bunkering

6%Merchandise

excl. freezone 11%

Transportation7%Refining

16%

Tourism14%

International financial services18%

Other services11%

2000

Freezone12%

Bunkering14%

Merchandise excl. freezone

3%

Transportation7%

Refining17%

Tourism27%

International financial services4%

Other services10%

2013

24

*Income from the export of goods and services.

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Contribution to foreign exchange income* in 2000 and 2013

(SintMaarten)

Merchandise 10%

Transportation2%

Tourism79%

International financial services

2%

Other services7%

2000Bunkering

3%

Merchandise 11%

Transportation2%

Tourism71%

International financial services1%

Other services11%

2013

25

*Income from the export of goods and services.

Tourism sector

26

972 1,044

1,507 1,535

0

400

800

1,200

1,600

2009 2010 2011 2012 2013

NA

f. m

illi

on

Curacao Sint Maarten

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International financial sector

27

181 181

4117

0

100

200

300

400

2009 2010 2011 2012 2013

NA

f. m

illi

on

Net operational income Profit tax BRK windfall

Refining fee(Curaçao)

28

584

659

0

100

200

300

400

500

600

700

2009 2010 2011 2012 2013

NA

f. m

illi

on

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Monthly import coverage

29

0

1

2

3

4

5

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Months

Import coverage norm Import coverage Import coverage estimate

Openness vsreal GDP growth(2011 – 2013)

30

Source: CBCS and CBA.

Average

openness

Average real

GDP growth

Curaçao 168.1% -0.1%

Sint Maarten 253.1% 0.3%

Aruba 313.2% 2.0%

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Real Effective Exchange Rate Curaçao

31

-1

0

1

2

3

92

94

96

98

100

102

2007 2008 2009 2010 2011 2012 2013

REER Curacao Real GDP growth Curacao (%)

Real Effective Exchange Rate SintMaarten

32

-2

-1

0

1

2

3

4

5

92

96

100

104

108

112

2007 2008 2009 2010 2011 2012 2013

REER Sint Maarten Real GDP growth SXM (%)

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33

Monetary and financial sector

Main monetary developments

34

• Marginal increase in money supply.

• Decline in private credit extension.

• Commercial bank lending rates increased

slightly while borrowing rates remained

about the same.

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Money supply

3,5413,9213,900

3,566

0

1,000

2,000

3,000

4,000

5,000

2009 2010 2011 2012 2013

NA

f. m

illi

on

Net domestic assets Net foreign assets35

Net domestic credit

19676

218

-66-100

370

-1,100

-800

-500

-200

100

400

700

2009 2010 2011 2012 2013

NA

f. m

illi

on

Government Private sector Other36

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Domestic interest rates(commercial bank borrowing rates)

0%

2%

4%

6%

8%

10%

Passbook savings Time deposits (12 months)37

Domestic interest rates(commercial bank lending rates)

0%

4%

8%

12%

16%

Mortgages Time loans38

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Interest spreadtime loan vs. time deposit

0%

2%

4%

6%

8%

10%

12%

14%

Time loans Time deposits (12 months)39

Interest spreadmortgages vs. passbook savings

40

0%

2%

4%

6%

8%

10%

12%

Mortgages Passbook savings

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Domestic interest rates(government securities)

0%

2%

4%

6%

8%

10%

Gov. bond (5yr, eff. yield) Treasury bills (12 month)41

Private credit extension (year-on-year growth)

42

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Loans to the private sector Loans to the private sector Curaçao

Loans to the private sector Sint Maarten

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Development in loans Curaçao (percentage changes)

43

4.1%

-5.8% -3.1%

-20%

-10%

0%

10%

20%

30%

40%

Mortgages Consumer Loans Business Loans

2010 2011 2012 2013

Development in loans Sint Maarten (percentage changes)

44

4.2%

-5.6%-6.7%

-10%

-5%

0%

5%

10%

Mortgages Consumer Loans Business Loans

2010 2011 2012 2013

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Monetary policy stance in 2013

45

The Bank continued with its tight monetary policy stance:

•Gradual increase of the percentage of the reserve requirement.

•Auctioning of more certificates of deposit against various

maturities.

•Extension of the credit measure.

Timeline monetary policy

46

16 September 2011 – 15 June 2014 Monetary tightening by gradually increasing the reserve

requirement percentage from 9.75% to 18.00%.

1 March 2012 – 31 August 2012 Introduction temporary credit freeze.

1 September 2012 – 28 February

2013

Prolongation temporary credit measure while allowing 1%

growth in credit extension compared to August 2012.

1 March 2013 – 31 August 2013 Prolongation temporary credit measure while allowing 2%

growth in credit extension compared to August 2012.

1 September 2012 – 28 February

2014

Prolongation temporary credit measure while allowing 3%

growth in credit extension compared to August 2012.

1 March 2014 – 31 August 2014 Prolongation temporary credit measure while allowing 4%

growth in credit extension compared to August 2012.

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Main financial developments

47

• Banks:

- Worsening of capitalization, although still

relatively strong.

- Further increase in non-performing loans.

- Decline in profitability.

- Increase in assets, albeit less pronounced

than in 2012.

Capital adequacy

48

11.5%10.9%

0%

2%

4%

6%

8%

10%

12%

14%

2009 2010 2011 2012 2013

Total capital / total assets 8% norm

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Assets quality

49

3.2%3.8%

8.2% 8.3%

3.1% 3.2%

0%

2%

4%

6%

8%

10%

2009 2010 2011 2012 2013Gross specific provisions-to-total loans Non-performing loans-to-total loans

Gross general provisions-to-total loans

Earnings & profitability

50

1.7%

1.1%

0%

1%

2%

3%

2009 2010 2011 2012 2013

Return-on-assets 0.6% norm

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Development in profit commercial banks

(in millions NAf.)

51

0

50

100

150

200

250

300

2009 2010 2011 2012 2013

Commercial banks: Net Operating Income

52

Outlook 2014 & 2015

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Expected developments in the monetary union in 2014 & 2015

2012 2013 2014** 2015**

Current account balance (in mln

NAf.)-1,388.8 -1,155.8 -1,214.0 -1,338.5

Change in gross foreign reserves

of the central bank (in mln

NAf.)*

277.5 47.9 -211.4 -85.0

Real GDP growth (%)

Curaçao -0.1 -0.8 -0.4 0.5

Sint Maarten 1.5 0.9 1.4 1.6

Inflation (%)

Curaçao 3.2 1.3 1.1 1.0

Sint Maarten 4.0 2.5 2.4 2.2

*- sign means an increase

** projection CBCS.

Expected developments in Curaçao in 2014

54

• The Curaçao economy is projected to contract

by 0.4% in 2014 ascribable to a decline in net

foreign demand, mitigated by an increase in

domestic demand.

• Inflation will ease to 1.1%, supported by a

projected decline in international food prices.

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Expected developments in Sint Maarten in 2014

55

• Sint Maarten’s real GDP is estimated to

grow by 1.4% in 2014, mainly due to the

tourism sector.

• Inflation will ease to 2.4%, driven mainly

by projected lower average international

food prices.

Expected developments in Curaçao in 2015

56

• Curaçao’s economy is projected to expand by

0.5% in 2015, due to an increase in domestic

demand, mitigated by a decline in net foreign

demand.

• Consumer price inflation is expected to ease to

1.0% because of a projected decline in average

international oil and food prices

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Expected developments in Sint Maarten in 2015

57

• Sint Maarten’s real GDP is estimated to

grow by 1.6% in 2015 as it will benefit

from the projected economic growth in

the United States and Europe.

• The inflation rate is projected to ease to

2.2% because of an expected decline in

average international oil and food prices.

Projection balance of payments 2014 & 2015

58

-85.0-211.447.9277.5Change in reserves

203.6507.2268.9573.7Portfolio investments

780.0576.3557.4260.3Loans and credits

250.0185.0114.8133.4Direct investments

1,233.61,268.5967.4941.1External financing

8.310.262.269.7Capital account

-1,338.5-1,214.0- 1,155.8- 1,388.8Current account

2015201420132012

(transaction basis, NAf mln)

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