WILLEMSTAD – Curaçao’s economy grew by 5% in 2024, driven largely by a strong tourism season, but the International Monetary Fund (IMF) has issued a stark warning: without deep structural reforms, this growth cannot be sustained.
In its concluding statement following the Article IV consultation, the IMF praised the island’s recent recovery but highlighted significant vulnerabilities in its healthcare, pension, labor, and tax systems. Failure to act, it said, could lead to rising inequality, social unrest, and an overburdened national budget.
Growth Fueled by Tourism, But Cracks Are Appearing
According to the IMF, Curaçao’s tourism boom is benefiting multiple sectors, including trade, real estate, and construction. However, the island’s manufacturing sector is shrinking, and income inequality remains persistent. Formal employment continues to decline while low-paid informal jobs in tourism and construction expand.
While real wage growth returned in 2024 for the first time in five years, the informal sector still accounts for the majority of new jobs—highlighting the need for labor market formalization.
Healthcare Costs "Unsustainable"
The IMF raised alarms over the mounting pressure on Curaçao’s social safety net, particularly in healthcare. The SVB health fund currently runs a deficit of 5% of GDP annually, not including government subsidies. Meanwhile, the Curaçao Medical Center also faces a 1% GDP shortfall each year. In total, health spending now accounts for 13% of GDP, surpassing the average in most OECD countries.
To address this, the IMF is calling for urgent reforms, including:
Capping medication volumes
Revising lab tariffs
Strengthening primary care
Expanding preventive health services
It also recommends increasing revenues through:
Including migrants in the healthcare system
Higher premiums for high-income earners
Encouraging supplementary insurance
Promoting medical tourism
Pension System Also Under Pressure
The IMF also flagged the pension system as a major concern. Since 2016, real pension value per capita has declined by 23%, and indexation has been halted. While the government implemented a targeted increase for low-income pensions in 2024, the overall system remains fragile.
Efforts are underway to expand pension coverage, particularly among undocumented youth and migrant workers, and a new bill is being drafted to make second-pillar pension schemes mandatory.
Public Finances Stable—For Now
Curaçao’s public finances remain balanced, thanks in part to increased consumption tax revenues. The island is complying with Kingdom budgetary rules and is expected to repay part of a major bullet loan in 2025 using its own funds.
However, the IMF warns that without reform, escalating social spending will become unsustainable. It suggests that funding could come from eliminating tax exemptions and introducing a tourist levy in 2026.
It also recommends transitioning to a value-added tax (VAT) system, which would generate stable revenue and promote greater fairness in the tax system.
Cautious Optimism—With Conditions
The IMF commended the government for investing in infrastructure, digitalization, and education, including the launch of a new wind farm and the expansion of school facilities.
However, it also warned of looming risks:
Delays in public investment projects
A heating housing market fueled by rapid mortgage growth
Overdependence on tourism, which could plateau
Economic growth for 2025 is projected at 4%, but the IMF expects it to decline to 2% in the medium term. Without structural reforms in healthcare, pensions, the labor market, and taxation, Curaçao risks losing its economic resilience.
The IMF's message is clear: the window for reform is now—before short-term success gives way to long-term stagnation.
