Tromp positive about 2008,
certain of continued growth
PHILIPSBURG--Central Bank of the Netherlands Antilles President Emsley Tromp says that, in general, the outlook for 2008 is positive. He made his comments in a recently published written statement in which he looked back at the developments during 2007 and looked forward to 2008.
Tromp again expressed his wish for 100 per cent debt relief from the Netherlands. He believes this is the only way government will realise tangible policy results on short notice.
The positive outlook for 2008 will be characterised by continued growth in private sector spending, although more moderate compared to 2007. However, the developments on the oil market will be a risk factor that could influence the pace of economic growth negatively.
The beginning of the debt cancellation and budgetary discipline offer structural prospects for making public finances healthy again, Tromp said.
“This will gradually make a place for better wellbeing of the people through reduction of social cost, better education, better health care, more safety and a sound infrastructure,” he stated.
The positive economic climate, the debt relief and the projects of the Social Economic Initiative will form a solid basis for a healthy financial position for the new entities-to-be. But, Tromp said, hard work is needed from both sides of the ocean to finish all the preparatory work.
The economy of the Netherlands Antilles started showing growth in 2006. The growth for 2007 has been estimated at 2.4 per cent while in 2008 the total growth will be even higher at 2.6 per cent.
The growth can be attributed mainly to the private sector. Investments have been growing steadily, supported by various tourism projects in progress.
Consumer spending has also gone up due to more credit available for consumption and growth in employment. All sectors have been showing a positive trend, especially the building sector and small and medium businesses, Tromp said.
The positive economic developments reflect as well on the job market. Besides from St. Maarten and Bonaire, Curaçao also has shown a decreasing trend in unemployment.
This trend is likely to continue during 2008, but it is important to minimise the qualitative discrepancies on the labour market, especially in Curaçao where the need for hotel personnel will grow explosively in the coming years due to new hotels being built.
On the other hand, Tromp warned that the inflation rate would also increase due to the increasing oil price and the effect this would have on local prices. The inflation for 2007 will be three per cent, while for 2008 inflation will be expected to increase to 3.5 per cent.
Until now, the government of Curaçao has absorbed a large portion of the increased price of oil, through government-owned company Curoil. Consequently, the increase of gas prices, water and electricity remained moderate.
However, the anticipated price limit of US $100 per barrel on the international market will be reached some time soon. Combined with an expected loss for Curoil in 2007, an increase in gas, water and electricity prices will be inevitable in 2008.
The negative effect this will have on spending power forms a real threat for the pace of the economic growth. Government has hardly any means left to absorb more increased oil prices.
The option of lowering the gasoline excise is not realistic, according to Tromp, because Government will need these revenues to balance its budget, a condition for debt cancellation from the Netherlands.
The only short-term option left is to inform the public intensively how to keep energy cost as low as possible. In the long run, alternative forms of energy will have to be explored, such as sun and wind energy, and refrigeration via use of seawater.
