Curaçao and Sint Maarten: Staff Concluding Statement of an IMF Staff Visit

November 30, 2021

A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF's Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.

The authorities have consented to the publication of this statement. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board.



Washington, DC: An International Monetary Fund (IMF) mission met virtually with the authorities of Curaçao and Sint Maarten during November 8–24 to discuss recent economic developments, update the macroeconomic outlook, and follow up on the policy priorities raised during 2021 Article IV consultation discussions. This concluding statement summarizes the mission’s main takeaways.

The pandemic compounded prior shocks and pre-existing vulnerabilities in Curaçao and Sint Maarten. Curaçao has been struggling with the decline of the refining sector and Sint Maarten has not recovered from major hurricanes in 2017. Both countries had unfinished reform agendas that constrained adjustment to these shocks. The pandemic wielded a major blow to the hospitality sectors and broader economies, although strong policy response efforts, supported by financing from the Netherlands, helped save lives and livelihoods and significantly reduced the fallout from the pandemic.

Robust vaccination efforts and gradual reopening of the economies set the stage for some nascent output growth in 2021 and a stronger economic recovery in 2022. Both countries raised their vaccination rates to levels among the highest in the region, supporting increases in stayover tourism that are among the fastest in the region. Yet, both economies faced significant headwinds including bouts of COVID-19, unprecedented uncertainty, strained balance sheets in all sectors, and the absence of cruise tourism, which began to recover only in late 2021. Despite new vacancies in the hospitality sector, formal sector employment continued to fall, due in part to further downsizing of the Curaçao refinery and a likely move to the informal economy in both countries. Both Curaçao and Sint Maarten are facing higher inflation rates due to rising import prices and disruptions in the global supply chain causing delays and sharp increases in shipping costs. Assuming no major COVID-19 outbreak, the combination of these factors is likely to lead to moderate output growth in 2021, followed by a stronger broad-based recovery in 2022.

  • Curaçao: Staff project real GDP growth of 2 percent on account of a strong recovery of stayover tourism in the second half of 2021 and some recovery in private investment. GDP growth could accelerate to 7 percent in 2022, supported by further strengthening of stayover arrivals and the gradual resumption of cruise tourism in late 2021.
  • Sint Maarten: As cruise tourism is an important contributor to the economy of Sint Maarten, the lag in its recovery implies that GDP would grow only by 4 percent in 2021 even though stayover arrivals would reach about three quarters of its 2019 levels. In 2022, real GDP growth is expected to accelerate to 12 percent, with positive contributions from both stayover and cruise tourism flows and construction projects including the airport terminal and the new hospital.

In both countries, the growth outlook is still subject to significant risks and elevated uncertainty. A new COVID-19 outbreak would reverse positive tourism trends. Also, data lags and gaps in statistics pose major constraints for macroeconomic analysis.

The authorities are phasing out COVID-19 support measures and are implementing fiscal consolidation. The Curaçao authorities took welcome measures to improve tax compliance, yielding more fiscal revenue, and are implementing a scheme of restructuring past tax liabilities. Both Curaçao and Sint Maarten ended their COVID-19 support measures in September 2021 on account of financing constraints and reduced demand, although Curaçao is planning to keep income support until the end of the year. Both governments are planning to maintain nominal wage freezes in the coming years to contain fiscal expenditure. The Curaçao authorities prepared a package of measures to reduce costs in the health system. The Central Bank of Curaçao and Sint Maarten removed the restriction on transfers of dividends or profits to non-residents and eased capital flow measures with the aim to phase them out by April 1, 2022 if the economic recovery continues.

Both Curaçao and Sint Maarten are cooperating with the Netherlands on establishing the Caribbean Entity for Reform and Development (COHO), a Kingdom-level body for supporting and supervising the development and implementation of structural reforms. They are already implementing their quarterly agendas in the framework of the country reform packages, although the efforts have so far been focused largely on diagnostics and planning.

The near-term priorities should be on completing vaccinations, providing support where necessary, and setting the stage for inclusive recovery and medium-term sustainability. Active labor market policies including training and assistance with job matching process are needed to reduce scarring in the labor market and retain human capital. Proactive training and certification in Sint Maarten could help promote local labor participation in the ongoing large construction projects. Both governments should support the vulnerable groups as needed. Deploying a guaranteed lending facility for viable SMEs in Curaçao—along the lines of the Enterprise Support Project successfully operating in Sint Maarten—would aid the recovery. As pervasive understaffing and funding constraints in the statistical agencies hamper their ability to produce key statistical products, there is an urgent need to fully staff and fund them to enable timely production of these products, including the population censuses planned for 2022. It would also be vital to provide adequate human and financial resources implementation of the country packages. Given the unprecedented macroeconomic uncertainty and risks, a different approach to liquidity support could be considered by adding room for adequate contingency buffers in addition to covering immediate spending needs.

Reaching medium-term sustainability requires growth-friendly fiscal consolidation, strong implementation of broad-based structural reforms, and the economic recovery. If financing allows, the fiscal consolidation paths should be gradual to avoid a negative drag on growth. Curaçao would benefit from moving to a full-fledged VAT under ambitious but realistic timeline, while paying due attention to cyclical conditions and the social impact. Sint Maarten should strengthen its tax administration, followed by the tax policy reform designed to broaden the tax base, streamline the system, and improve collections. Improving public financial management in both countries would be key for regaining fiscal sustainability. Both countries need far-reaching reforms of their health systems designed to improve efficiency while safeguarding its capacity to provide services. In parallel with implementing reforms, it would be key to restore the buffers in the health and social security systems, including by clearing government arrears to the SVB and SZV. Given the importance of public investment for supporting the recovery, creating jobs and improving potential growth, both countries would benefit from increasing it to more adequate levels, especially in Sint Maarten, where it averaged at only 0.2 percent of GDP during 2018-21. To maximize the impact, both countries should strengthen their frameworks for public investment and bolster their capacity for implementing capital projects. Completing the post-hurricane reconstruction in Sint Maarten and finding new areas for investment and growth in both countries would be vital for reversing the effects from the multiple shocks, achieving sustainability, and improving resilience.

The mission thanks the authorities of both Curaçao and Sint Maarten and all other counterparts for the open and productive discussions during this staff visit.

IMF Communications Department

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