Annual Report 2005 Bank van de Nederlandse Antillen

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Annual Report 2005Bank van de Nederlandse
Antillen

• Willemstad, August 17, 2006

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Developments in the real sector
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Macro-economic key figures main trading partners

• Growth slowed in all three countries.
• Inflation increased in US and the Netherlands
  but declined in Venezuela.
• Unemployment declined in US and Venezuela and
  remained stable in the Netherlands.

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Developments in 2005

• Moderate economic growth of 1.5
• Increase in private consumption.
• Recovery of private investment.
• Imports grew faster than exports, dampening
  growth.
• Inflation accelerated to 3.2 due to higher oil
  prices.
• Developments by sector
• Growth in tourism, particularly cruise tourism.
• Recovery in the construction sector.
• Expansion in wholesale retail trade sector.
• Mixed developments in the transportation sector.
• Activities local banks expanded but weak
  development in international financial business
  services.

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Economic development

• 2005 1.5 economic growth and 3.2 inflation.
• 2006 2.1 economic growth and 3.9 inflation.
• Higher growth due to
• large hotel projects and expansion airports
  (investments)
• 2nd reduction income tax rates (consumption).
• Higher inflation due to further increase in
  international oil prices and correction fuel
  prices in Curacao.
• 2007 baseline projection 2.0 economic growth
  and 3.4 inflation.

Projection
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Labor market developments

• Unemployment increased in Curacao but declined
  in St. Maarten and Bonaire.
• Average unemployment rate Netherlands Antilles
  increased from 15.1 in 2004 to 16.3 in 2005.

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Public sector developments
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Budgetary developmentGeneral Government(Cash
basis, mln. NAf)

• Deficit declined from NAf 341 million in 2004 to
  NAf 155 million in 2005 due mainly to revenue
  windfall related to BRK-transfers.
• Initial 2006 deficit has been reduced from NAf
  310 million to NAf 160 million.

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Budgetary developmentCentral Government(Cash
basis, mln. NAf)

• Deficit improved from NAf 206 million in 2004 to
  NAf 79 million in 2005.
• Higher revenues owing mainly to taxes, BRK
  transfers, and remittances BNA.
• Higher expenditures due primarily to goods
  services and transfers (BRK share Curacao).
• Initial 2006 deficit has been reduced from NAf
  170 million to NAf 100 million.

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Budgetary developmentIsland Government of
Curacao (Cash basis, mln. NAf)

• Deficit improved from NAf 135 million in 2004 to
  NAf 75 million in 2005.
• Higher revenues due mainly to more dividend
  from government-owned enterprises and share in
  BRK transfer.
• Higher expenditures due primarily to personnel
  costs and interest payments.
• Initial 2006 deficit has been reduced from NAf
  140 million to NAf 60 million.

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Development in total public debt (mln. NAf)

• Total debt of NAf 4.9 billion (84 GDP) at the
  end of 2005.
• Debt increased to NAf 5.0 million (86 GDP) in
  May 2006.

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Distribution public debt (December 2005)
13
Development in interest burden(mln. NAf)

• Interest burden amounted to NAf 285 million in
  2005 (23 of tax revenues and 17 of
  expenditures).

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Net borrowing of the governments (mln. NAf)

• Total net borrowing in 2005 NAf 116 million
  (Curacao NAf 55 mln. and central government NAf
  61 mln.).
• Total net borrowing until July 31, 2006 NAf 59
  million (Curacao NAf 11 mln. and central
  government NAf 48 mln).

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Government bonds maturity schedule (in mln. NAf
and as per July 31, 2006)

• During the next 10 years an average of NAf 255
  mln. in bonds matures.
• Average share of central government is 66.

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The external sector
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Balance of payments Transaction basis (mln. NAf)

• Deterioration current account in 2005 due mainly
  to higher imports related to increase in domestic
  spending and higher oil prices.
• Current account deficit was financed by capital
  import related to development aid and external
  net borrowing.
• Balance of payments surplus will decline in
  2006, among other things, because no new windfall
  in BRK-related transfers of the magnitude in 2005
  is expected in 2006.

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Foreign exchange revenues(current account 2005)
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Foreign exchange revenues from services(mln. NAf)
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Tourism revenues by island (NAf mln.)

• Average share
• St. Maarten 64
• Curacao 27
• Bonaire 9

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Foreign exchange contribution international
financial and business services sector(NAf mln.)

• Lower income as of 2003 due to elimination
  distinction between onshore/offshore in NFR.
• New tax treaties should generate more activities
  but progress is slow.
• Tax income is higher from 2003 due to the
  transfer of dividend tax from Holland.

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Development in international reserves
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Monetary
developments
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Development in the money supply(mln. NAf)
June

• Money supply increased by 9 in 2005 (NDA 8 and
  NFA 11).
• Money supply increased by 5 in 1st half 2006
  (NDA 4 and NFA 7).

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Net domestic credit by sector(change, mln. NAf)

• Neutral monetary financing by the government in
  2005 and contraction in 1st half of 2006.
• Net private sector credit grew strongly in 2005
  (13), which continued in 1st half of 2006 (10).

First half
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Development in credit extension Leeward Islands
Totaal
First half
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Development in credit extension Windward Islands
Totaal
First half
Note in 2004, a reclassification from mortgages
to business loans occurred.
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Development in domestic interest rates

• Downward trend in commercial banks deposit and
  lending rates.
• Official rates started to increase from 2004 due
  to rising US interest rates.

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The banking sector
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Balance sheet development domestic banks(mln.
NAf)

• Relatively large increases in assets,
  liabilities, and capital in 2005 due to
  acquisition by domestic bank of foreign
  subsidiary.

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P L development domestic banks(mln. NAf)

Relatively large increases in income,
expenditures, and profit in 2005 due also to
acquisition by domestic bank.
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Macro-prudential indicators
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Profit development central bank(mln. NAf)

• Profit central bank is closely correlated with
  income performance.
• 2005 profit consisted of NAf 51.3 mln. license
  fee and NAf 6.1 mln. operational result.
• 2006 profit estimated at NAf 63 million.

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Institutional investors
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Solvency insurance sector(mln. NAf)
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Balance sheet domestic life insurance sector(NAf
mln.)

• Total assets increased by 3.7 in 2004.
• 85 of total assets comprised investments.
• Equity position 2.6 times more than required.

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Balance sheet domestic non-life insurance
sector(NAf mln.)

• Total assets increased by 3.7 in 2004.
• 55 of total assets was invested.
• Equity position 2.4 times more than required.

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Net income domestic insurance companiesBefore
taxes (NAf mln.)

• Net result life insurance industry dropped to NAf
  12.9 million (-18.4) in 2004 due mainly to the
  increase in net technical provisions.
• Net result nonlife insurance industry dropped to
  NAf 1.7 million (-88.1) in 2004 due to higher
  net claims and underwriting expenses incurred.

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The End