Central Bank President Doornbosch: “Promote job creation through public investments”
PHILIPSBURG — “Unlock private investments and promote job creation through public investments.” That is one of the recommendations Richard Doornbosch, President of the Central bank of Curacao and St. Maarten (CBCS) makes in his report The Insight of Foresight that was released on January 26.
Doornbosch also advises helping the unemployed to find work through job training programs and job search assistance programs, to invest in education and lifelong learning, to address rigidities in the labor market and to improve the quality of, and access to digital technologies.
Both Curacao and St. Maarten should also have a multi-annual plan in place that guides the countries towards balanced budgets.
Strengthening public financial management, reforming the tax system and reaching agreements with the Netherlands about the refinancing of liquidity support loans that mature in April of this year should also have the attention of the respective governments.
The report contains charts that deal with a variety of topics, like inflation, gross domestic product growth and the debt to GDP ratio.
Image caption: Example of the one of the many charts in the report. Click here to download the report.
In most fields, the numbers for St. Maarten are better than those for Curacao. Inflation in Curacao is projected to increase from 4 to 4.9 percent this year, while inflation in St. Maarten will increase only slightly from 4 to 4.1 percent.
Unemployment in Curacao remains high in 2022, even though the percentage will drop this year to 18.3 percent from 20.2 percent a year earlier. Unemployment in St. Maarten is projected to fall from 15.8 percent in 2021 to 10.6 percent this year.
The debt to GDP ratio in Curacao remains sky-high: 90 percent in 2021 and 87 percent this year. For St. Maarten these numbers are much lower, though still worrisome: 62 percent in 2021 and 56 percent in 2022.
The main risks associated with the projections are the possible emergence of new COVID-variants and continued travel restrictions. The implementation of the country packages will also have an effect: structural measures will support growth, but counter-cyclical fiscal consolidation will dampen the pace of recovery. A further increase in international commodity prices and supply chain disruptions will result in higher than expected inflation and affect domestic demand, Doornbosh writes. In Curacao, a restart of refining activities would result in higher economic growth.
The report notes that Curacao is lagging behind in the region with real GP growth. In the disaster year 2020, it was -19.3 percent, in 2021 1.7 percent and the projection for this year is 6.9 percent.
St. Maarten is doing significantly better, with a negative growth of more than 20 percent in 2020, a rebound to around 4 percent in 2021 and a projected growth of almost 15 percent this year.
The report closes with a quote from the Canadian-American economist John Kenneth Galbraith: “There are two kinds of forecasters: those who don’t know and those who don’t know that they don’t know.”
Galbraith is an economist who leans towards post-Keynesian economics, a school of thought based on the principle of effective demand. It holds that demand matters in the long and the short term and that a competitive market economy does not have a natural or automatic tendency towards full employment.
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