“Barriers to finance remain for entrepreneurs and businesses”
WILLEMSTAD, PHILIPSBURG - In Curaçao, economic growth is projected to accelerate from 4.2% in 2023 to 5.4% in 2024, but slow to 3.2% in 2025, according to estimates of the Centrale Bank van Curaçao en Sint Maarten (CBCS) in its September 2024 Economic Bulletin. The forecast represents an upward revision of 0.5 percentage points from the June projection, induced by a stronger-than-initially projected performance of the tourism sector during the first half of the year coupled with robust activity growth in the construction sector. Growth in 2024 will be driven by both domestic and net foreign demand. Domestic demand will increase at a faster pace compared to 2023 because of gains in both private and public spending. Meanwhile, private investment growth is sustained by the ongoing construction projects in the tourism, utilities, real estate, and ship-repair industries.
Sustaining robust economic growth
The positive development in 2024’s first quarter set the tone, largely due to activity growth in the accommodation & food service activities sector, with both stay-over and cruise tourism experiencing an increase. In addition, the gain in the number of tourists fueled real value-added growth in the transportation sector, while real output rose also in the construction sector reflecting ongoing private investments.
Meanwhile, inflation in Curaçao is set to drop from 3.6% in 2023 to 3.0% in 2024, and decline further to 2.4% in 2025. The inflation forecast for 2024 has been revised up from June, induced by higher-than-initially projected international oil prices.
Addressing key constraints within the monetary union
Despite the positive economic forecast, the September 2024 Economic Bulletin includes a feature article on the barriers to development in small island economies such as Curaçao and Sint Maarten because of limited access to finance. “Without adequate funding, these economies struggle to diversify their export base and, hence, remain very vulnerable to external shocks. A lack of access to affordable capital constrains the ability of local businesses to expand, innovate, and improve productivity,” cautioned CBCS president, Richard Doornbosch. “These economies are more vulnerable to external shocks that can affect economic development and long-term prosperity. Most recently, Hurricane Irma and the COVID-19 pandemic have shown us that external shocks can severely hinder economic development, while recovery from such shocks may be slow and comes at a high cost,” the CBCS president emphasized.
The September 2024 Economic Bulletin’s feature article analyzes the challenges that businesses in Curaçao, particularly small and medium-sized enterprises (SMEs,) struggle with. “Barriers to obtaining business loans for starting entrepreneurs and small businesses often revolve around a combination of lacking collateral and difficulties in proving creditworthiness. Consequently, financial institutions perceive lending to this segment as too risky, leading to their exclusion from formal financial services,” Doornbosch explained. Microcredit has been put forward as a solution to address such challenges. In the last few years, microcredit loans are increasingly filling the finance gap for small businesses in Curaçao. “However, as discussed in the feature article, their impact on business growth and economic success is not straightforward,” he further cautioned.
“The policy agenda to improve the access to finance in Curaçao and Sint Maarten should focus on structural measures to attract foreign direct investment (FDI) through investor-friendly policies and incentives, which bring in needed capital for key sectors. In addition, adopting digital financial services and fintech platforms can broaden financial inclusion by making banking more accessible and cost-effective, especially for underserved groups and SMEs. Expanding microfinance institutions could also provide financial resources to small businesses and underserved individuals, which form a core part of the islands’ economies,” the CBCS president recommended.
