WILLEMSTAD - Curaçao’s fiscal position is expected to improve from 2018, reflecting the authorities’ multiyear fiscal adjustment package. However, additional effort would be needed to put the public debt on a sustainable downward path. Further structural reductions in current spending and enhanced revenue mobilization would create space for fiscal buffers and public investment. After the sizeable post-hurricane deterioration, Sint Maarten’s fiscal position is also expected to improve as the economy recovers. While donor budget support is critical in 2018–20, significant fiscal effort—within a well-prioritized and comprehensive fiscal plan—would be needed over the medium term to ensure debt sustainability and build fiscal resilience.
Structural impediments continue to stifle growth in the union and should be decisively tackled. Red tape, weak governance, antiquated regulations, skills mismatches, and infrastructure bottlenecks are among the key impediments facing the private sector in both countries. Reducing costs of doing business, including through streamlining and modernizing regulations, and facilitating economic adjustments and attracting investments through improved business environment, resilient infrastructure, and more dynamic labor markets should help enhance growth, productivity, and competitiveness of the economies.
Fiscal policy and structural reforms in both countries should contribute to safeguarding external stability. The external positions of Curaçao and Sint Maarten are moderately weaker than justified by medium-term fundamentals and desirable policies. While the fixed exchange rate regime limits the effectiveness of monetary policy, high excess liquidity in the banking system poses challenges to liquidity management and could put pressure on official reserves. The authorities’ efforts to improve the monetary policy framework are welcome, and they should aim to reduce excess liquidity while continuing to closely monitor developments in official reserves, remaining ready to act if pressures emerge.