Willemstad:--- The Curaçao economy recovered well in the first six months of 2022. Curaçao will reduce the budgetary deficit in 2022 and will present a balanced budget in 2023. However, the recovery of public finances is fragile and under pressure due to declining economic growth. New economic uncertainties and lagging savings and reforms in health care and social security present long-term risks for the public finances. A structural reduction in the costs of the public sector, health care, and social security, combined with strict fiscal policy, budget discipline, and reforms from the National Package (Landspakket) are essential to strengthen the public finances’ recovery. The Board of financial supervision of Curaçao and Sint Maarten (Cft) insisted on these issues in their recent meetings with the government of Curaçao.
In early 2022 the Curaçao economy recovered strongly from the COVID-19 crisis. The Central Bank of Curaçao and Sint Maarten estimate real economic growth at 5.5 percent in 2022. Partly driven by this strong recovery, Curaçao will reduce its budget deficit in 2022. However, the combination of high inflation, higher interest rates and increased economic uncertainty as a result of the war in Ukraine, is slowing economic growth worldwide. Under the influence of this economic headwind, real economic growth in Curaçao is expected to drop back to 2.9 percent in 2023.
Years of economic decline and rising government debt have severely deteriorated Curaçao's public finances. Curaçao's government debt currently amounts to ANG 4.3 billion, or 87 percent of the Gross Domestic Product (GDP). Curaçao faces the substantial task of lowering government debt to an acceptable level. A structural reduction of the costs of the public sector, health care, and social security in combination with strict budget policy, tight budget discipline, and reforms from the National Package is necessary to this end. Curaçao would benefit by making strong improvements in tax collection structural.
2023 budget and further
The government of Curaçao recently submitted the draft budget 2023 to Parliament. Herein Curaçao presents a balanced budget for 2023 and 2024 and surpluses as of the year 2025. The Cft urged Curaçao to realize budget surpluses as early as 2023 and to use these surpluses for partial repayment of the government debt. Curaçao has been yielding good results since 2021 with the project to increase tax compliance and optimize tax execution. On the other hand, structural measures to reduce costs, up till now have not been realized. Curaçao’s budget contains various risks that could annul the recovery of government finances should sufficiently control not be made. For instance, the Board has expressed its concerns about the lack of reforms and savings in health care and social security, the increase in personnel costs, and the high consumption of goods and services. Moreover, Curaçao will have to speed up measures to increase income, such as the introduction of a license fee for gambling providers.
Health care and social security
Reforms and savings in health care and social security are necessary to guarantee the sustainability of the social system for future generations. The Cft has been concerned for some time about the fact that
