WASHINGTON D.C. - In its report, the International Monetary Fund states that Curaçao's economy is on the path to recovery, buoyed by robust tourism growth and substantial private investment. The realization of Curaçao's considerable economic potential necessitates a well-defined development strategy that enjoys broad support from stakeholders. It is crucial for policies to promote inclusive growth while ensuring fiscal sustainability. Recent decisions to adopt a long-term debt anchor and formulate an investment strategy are commendable steps towards establishing a medium-term fiscal framework. The successful implementation of the package of structural reforms (landspakket) agreed upon with the Netherlands will be instrumental in addressing longstanding structural challenges.
After enduring a prolonged recession, Curaçao's economy demonstrated resilient, albeit uneven, growth in 2021-2022. Output expanded by 4.2 percent in 2021, and it is estimated to have grown by 6.5 percent in 2022. This growth was supported by a strong recovery in tourism and increased private investment, although certain sectors such as the maritime industry still lag behind. While official data indicates subdued formal employment, a recent labor force survey revealed a significant increase in total employment, indicating substantial growth in the informal sector. The rise in inflation last year, driven by soaring import prices, put pressure on real disposable incomes and had adverse effects on vulnerable populations.
Economic growth is expected to moderate in the coming years. The tourism sector, benefiting from the opening of new resorts, is projected to support a 3 percent growth in 2023 and 2024. Considering the significant decline in 2020, real GDP is forecasted to recover to pre-pandemic levels by 2026, slightly later than the Caribbean average. Inflation is projected to decrease to 3.8 percent in 2023 and stabilize at 2 percent in the medium term, aligning with the anticipated decline in import prices. Nevertheless, the economic outlook is exposed to notable risks, including a severe downturn in Curaçao's trading partners, spikes in commodity prices, and deepening geo-economic fragmentation.