WILLEMSTAD, PHILIPSBURG - Following a robust post-pandemic expansion in 2022, real GDP growth subsided but remained strong across the monetary union in 2023. Growth moderated in Curaçao to 4.2%, following an increase of 7.9% in 2022. Meanwhile, Sint Maarten recorded a real GDP expansion of 3.8%, down from a very strong 13.9% increase in 2022.
Inflationary pressures weakened significantly in both countries reflecting lower domestic fuel and energy prices on the back of a drop in international crude oil prices. Hence, inflation broadly halved in Curaçao from 7.4% in 2022 to 3.6% in 2023, while it eased in Sint Maarten to 2.1% from 3.8% a year earlier, according to the June 2024 Economic Bulletin of the Centrale Bank van Curaçao en Sint Maarten (CBCS).
Tourism and construction were the main drivers of growth in 2023
Sustained by an increase in the number of cruise and stay-over tourists that visited Curaçao and Sint Maarten, real GDP growth in both countries was underpinned primarily by increased activities in the construction and accommodation & food activities sectors. The gain in the construction sector was consistent with an increase in private investments across the monetary union. In Sint Maarten, the reconstruction activities at the airport’s terminal building specifically fueled the strong growth in the construction sector.
Curaçao’s real GDP expansion in 2023 was driven mainly by an increase in net foreign demand as exports rose at a faster pace than imports. In addition, domestic demand went up on the back of higher private spending. In particular, private investments in the tourism, wholesale & retail trade, utilities, and real estate sectors rose.
Growth in Sint Maarten was sustained by an increase in domestic demand, while net foreign demand dropped. The latter was due to an increase in the import of goods and services that surpassed the higher exports. Both private and public demand contributed to the gain in domestic demand. Private demand grew, supported primarily by higher investments in large commercial and residential projects. Higher public consumption, as reflected by more government spending on goods & services and wages & salaries, led to the growth in public demand.
Positive outlook on growth
Looking ahead, real GDP growth will moderate further across the monetary union over the forecast horizon of 2024 – 2028. In the case of Curaçao, however, real GDP growth is projected to accelerate to 4.9% in 2024 before slowing down to 3.3% in 2025 and converging to 2.0% by 2028.
In Sint Maarten, the pace of expansion will ease to 3.2% in 2024 and decelerate further to 2.1% in 2025 as large construction projects, including the reconstruction of the airport, are expected to be completed by the end of 2024. Over the medium term, growth is expected to remain stable at on average 2.1% per year.
Global uncertainties remain
External risks to the outlook include a delay in the assumed timing of monetary policy easing by major central banks, an intensification of geopolitical tensions that could result in commodity price hikes and restrictions in cross-border movements, and the occurrence of extreme weather events due to climate change. Meanwhile, one of the main domestic risks is delays in the execution of structural reforms and public investment programs. This risk is particularly relevant for Sint Maarten given the current political instability and uncertainty. In addition, more frequent power and internet connectivity outages could affect productivity, investment decisions, and, hence, economic growth in Curaçao and Sint Maarten. For Curaçao specifically, the current financial woes faced by the Curaçao Medical Center (CMC) pose a significant downside risk to the sustainability of the public finances. In the case of Sint Maarten, further delays in the reconstruction of the airport could dampen the country’s growth prospects. On the upside, however, a positive outcome from the Mutual Evaluation of the CFATF will ensure that both countries are able to carry on international business and transactions with minimal interference.