Central Bank annual report: Economy (maybe) back to pre-pandemic levels in 2024

PHILIPSBURG — St. Maarten’s real Gross Domestic Product declined by 22.4 percent in 2020. Curacao saw a drop of 19.3 percent it appears from the 2020 annual report of the Central Bank of Curacao and St. Maarten (CBCS). “During the second quarter of 2020 economic activity in both countries came practically to a standstill, as they implemented a border closure that lasted approximately three months and a total lockdown of approximately six weeks,” the report states.

At the end of the year St. Maarten’s budget deficit amounted to 10.9 percent of GDP; in Curacao it was 14 percent, CBCS-director Richard Doornbosch writes in his analysis.

The latest estimates suggest that the economies of Curacao and St. Maarten may only reach their pre-pandemic levels by 2024. Doornbosch projects real GDP growth of 0.1 percent in 2021 for Curacao and 3.4 percent for St. Maarten. Next yet, growth percentages are expected to shoot up to 6.2 percent (Curacao) and 14.4 percent (St. Maarten).

The CBCS-director warns however that nothing is certain: “The path of economic recovery is uncertain as it depends on how the virus develops and the speed of the vaccine roll-out. Therefore, it is important that both countries make progress in their vaccination programs.”

The Central Bank assumes that the corona-crisis could also affect the local labor forces. The report mentions not only discouraged workers but also “labor migration to countries with better prospects.”

The Central Bank encourages the governments of Curacao and St. Maarten to take measures to speed up economic recovery. They ought to stimulate private investments by “reducing the cost of doing business, lengthy administrative procedures and red tape.” Governments should also continue to support the most affected sectors and workers. These measures should be complemented by retraining and skill development programs.

Next to that, the Central Bank pleads for “a more inclusive growth path that provides opportunities to all groups and distributes aggregate income in a fairer manner.” This requires investments in the education system, encouraging lifelong learning, addressing rigidities in the labor market and improving the quality of and access to digital technologies.

Because the Central Bank does not expect a return of the economies to pre-pandemic levels before 2024 “high fiscal debts will persist over the medium term, making additional liquidity support from the Netherlands indispensable. This poses a risk to debt sustainability.”

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