Amid a challenging external environment
WILLEMSTAD, PHILIPSBURG - The monetary union continued its path of economic recovery in 2023, although the pace of expansion was less pronounced than in 2022. According to the latest estimates by the Centrale Bank of Curaçao en Sint Maarten (CBCS), real GDP growth in Curaçao fell from 7.9% in 2022 to 4.1% in 2023. For Sint Maarten, the growth slowdown was more significant; from 9.8% in 2022 to 3.8% in 2023. “The economies of both countries grew, despite a challenging external environment that was plagued by, among other things, the long-term effects of the pandemic, repercussions of the war in Ukraine, heightened geopolitical tensions, spillovers of monetary policy tightening to tame inflation, and extreme weather conditions,” CBCS president Richard Doornbosch pointed out in the December 2023 Economic Bulletin.
An analysis of the GDP components on the expenditure side reveals that private investment, public consumption and exports were the drivers of growth in Curaçao in 2023. However, declines in private consumption and public investment, and a higher import bill dampened the pace of expansion. Meanwhile, in Sint Maarten, growth was supported primarily by an increase in domestic demand as both private and public spending went up. The gain in private spending reflected primarily an increase in investments, including the reconstruction of the airport. In addition, public spending grew, sustained by both higher consumption and investment by the government. Net foreign demand also contributed positively to growth as the gain in the export of goods and services outpaced the higher import bill.
According to the latest Economic Bulletin, in 2024, the CBCS expects that real GDP will grow by 4.4% in Curaçao, while an expansion of 3.0% is projected for Sint Maarten. Growth is projected to decline gradually over the medium term across the monetary union, converging to 1.7% in Curaçao and 1.6% in Sint Maarten by 2027. “At this pace of expansion, Curaçao will reach the prepandemic level by 2024, which is earlier than previously expected. Compared to Curaçao, Sint Maarten recovered faster from the pandemic, as real GDP already reached the pre-pandemic level in 2023. However, the scars inflicted on the country’s economy by hurricane Irma in 2017 were deep. As a result, Sint Maarten’s real GDP is set to reach the pre-Irma level by 2024, seven years after the devastating hurricane,” Doornbosch observed.
Doornbosch cautioned, however, that the outlook is subject to significant risks. “The main risk relates to finalizing a viable resolution strategy for ENNIA. Implementing a durable strategy is crucial to prevent severe adverse social and economic effects, including a negative impact on the public finances, and to avoid a run-off of international reserves. Within its mandate, the CBCS is collaborating with the governments of Curaçao and Sint Maarten to develop such a strategy, while safeguarding the interests of ENNIA’s policy holders,” he explained. “Global risks that could weigh on the growth prospects of the monetary union include further monetary policy tightening by major central banks, further escalation of geopolitical tensions, increased fragmentation of global trade flows, and production restrictions by oil-exporting countries,” he continued.
“Domestic risks to the outlook include climate change-related extreme weather events and, in Sint Maarten, possible delays in the completion of major investment projects including the reconstruction of the airport and the construction of a new general hospital,” Doornbosch said. “Another factor that could affect the medium-term growth path of Curaçao and Sint Maarten is the outcome of the Mutual Assessment by the CFATF that is scheduled to take place in the third quarter of 2024. The assessment is important for the countries to be able to carry on with minimal interference in international trade and transactions,” the CBCS president concluded.