Published On: Mon, Dec 28th, 2015

Central Bank: Economic Developments in 2015 and Outlook for 2016

Central BankWILLEMSTAD – According to the Central Bank of Curaçao and Sint Maarten, the preliminary data suggest that the economies of both Curaçao and Sint Maarten expanded modestly during 2015. Following an economic contraction during the past three years, the tentative conclusion is that, as opposed to the economic contraction during the first half of this year, the economy of Curaçao expanded during the third quarter. This indicates that the economy of Curaçao will probably register a slight expansion of 0.2% in 2015. Meanwhile in Sint Maarten, economic growth slowed down from 1.5% in 2014 to 0.3% in 2015. In both countries, inflationary pressures dropped during 2015 as a result of the significant fall in international oil prices.

The economic expansion in Curaçao was driven by a growth in public demand, as both government investment and consumption rose. In addition, net foreign demand contributed positively to GDP growth because the decline in imports offset the drop in exports. By contrast, private demand dropped because of a further decline in investments. The decline in private investments indicates that investor confidence is not yet restored in Curaçao. A sectoral analysis reveals that the drivers of economic growth in Curaçao during 2015 were the transport, storage & communication, restaurants & hotels, and wholesale & retail trade sectors. By contrast, the financial services and construction sectors contracted.

Central BankralIn Sint Maarten, both private and net foreign demand contributed positively to growth. Private demand was up, due to higher consumption and investments. Meanwhile, the increase in net foreign demand was caused by a drop in imports mitigated by lower exports. Economic growth was dampened, however, by the public sector as both consumption and investments dropped. On the production side, Sint Maarten’s economic slowdown resulted from weakened activities in the restaurants & hotels and transport, storage & communication sectors. Furthermore, real value added contracted in the financial services, manufacturing, and construction sectors.

On the fiscal front, challenges remain for both countries, although it seems that both the governments of Curaçao and Sint Maarten will record a budget surplus in 2015. To maintain a sustainable debt position, however, the government of Curaçao needs to control the rapidly increasing debt to GDP ratio, which is already above the IMF’s benchmark of 40%. Meanwhile, the government of Sint Maarten needs to implement the instruction it received from the Kingdom Council of Ministers in September 2015. The Bank has indicated on several occasions that the government of Sint Maarten needs to increase its revenues, in particular tax revenues, in order to cover its expenditures. Otherwise, the country will remain in a vicious circle of unbalanced budgets and accumulating arrears.

In 2016, both countries will benefit, albeit modestly, from the projected higher global economic growth. The economy of Curaçao is projected to expand by 0.5%, attributable to an increase in both private and public demand, mitigated by a decline in net foreign demand. Sint Maarten’s economy is projected to grow by 0.7% on the back of increased private spending, while public spending and net foreign demand will drop.

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