WILLEMSTAD - The significant appreciation of the US dollar against the euro, given Curaçao's strong trade relationship with the Netherlands, could have adverse effects on Curaçao's balance of payments, according to Richard Doornbosch, President of the Central Bank of Curaçao and Sint Maarten (CBCS).
The balance of payments is a financial benchmark that records economic transactions between Curaçao and the rest of the world. It includes the export and import of goods and services, capital flows, and financial transactions, providing insights into the financial health and trade position of a country.
Curaçao's small and open economy faces substantial vulnerability to external shocks, as warned by Doornbosch in the Economic Bulletin of September 2023. This vulnerability manifests in fluctuations in the balance of payments of the monetary union.
In recent years, various shocks, including the COVID-19 pandemic and rising international commodity prices, particularly oil, have had negative effects on the current account of the balance of payments, further exacerbating the existing deficit on the current account.
Sustainable Outlook
Doornbosch emphasizes that a persistently high deficit on the current account is no longer sustainable for these small, open economies. It is therefore urgently necessary to implement policies focused on structural measures, as monetary policy measures are limited due to the peg to the US dollar.
To ensure economic stability, Curaçao should concentrate on diversifying its exports and investing in sustainable energy sources such as wind, solar, and marine energy. These measures will help reduce vulnerability to external shocks and strengthen the economies of both countries.