IMF Staff Concludes Staff Visit to Curaçao and Sint Maarten

IMF News, July 13, 2020

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COVID-19 pandemic is inflicting major economic damage in both Curaçao and Sint Maarten.
Real GDP is projected to drop by 23 percent in Curaçao and 25 percent in Sint Maarten.
The shock is amplified by pre-existing vulnerabilities:
- Curaçao: protracted recession and challenges with reviving the refinery.
- Sint Maarten: incomplete recovery from the 2017 hurricanes.
Major impact across fiscal revenue, social security systems, and balance sheets in all sectors.
Mass-layoffs have so far been avoided due to employment support measures, but there are indications of job losses.
Border closures since mid-March followed by full lockdowns have prevented spread of the virus but produced significant blows to tourism sectors.

Despite phased re-opening of borders since mid-June, tourism is likely to recover only gradually due to both supply and demand factors.
GDP would reach its 2019 levels only by 2023 in both countries.
The growth outlook is subject to significant uncertainty and risks.

COVID-19 response packages in both Curaçao and Sint Maarten focus on:
- supporting employment and affected businesses,
- ensuring public health,
- protecting vulnerable groups.
Fiscal support measures will be needed for longer than originally planned and could be needed through at least the end of this year.
Continued support would lead to a sizeable increase in fiscal deficit and public debt in the short term.
The unavoidable increase in debt would be justified provided that the authorities put in place measures to put the debt firmly on a downward path as the crisis abates.
If additional financing is available, deferred measures that should be implemented include:
- supporting social security systems,
- supporting small and medium enterprises (SMEs),
- reaching out to the most vulnerable.
The pace of fiscal consolidation during the acute period of the crisis should be as gradual as feasible to minimize adverse impact on growth.

Additional financing should be accompanied by a strong commitment to deep structural reforms that were urgently needed before the shocks.
Priority should be given to measures improving long-term fiscal outcomes and minimizing fiscal risks, such as the recently implemented public sector pension reform in St. Maarten.
Broad-based supply side reforms focusing on the business climate and labor markets are critical for adapting to the new normal.
Reforms should be:
- properly sequenced,
- supported with sufficient human and financial resources,
- based on sound data,
- designed to produce a lasting result.
Strong local ownership of the reforms will be vital for successful implementation.
Major improvements in data availability and quality are needed to inform policymaking.

An IMF team, led by Mr. Dmitriy Kovtun, conducted a virtual staff visit to Curaçao and Sint Maarten during June 10-July 8.
The mission will not result in a Board discussion.
Excerpt of Mr. Kovtun’s statement included assessment of lockdowns, economic shocks, and policy guidance, and thanked counterparts for open and fruitful discussions.

IMF Staff Concludes Staff Visit to Curaçao and Sint Maarten