Willemstad/Philipsburg:--- The Centrale Bank van Curaçao en Sint Maarten (CBCS) has released its Economic Bulletin of 2022 that includes a preliminary growth estimate for Curaçao and Sint Maarten for 2022 and the outlook for 2023. “Despite a worsened external environment on the back of, among other things, persistently high inflation, tighter financial conditions, and spill-over effects of the war in Ukraine, the monetary union’s recovery from the COVID-19 pandemic continued in 2022. Growth was sustained in both Curaçao and Sint Maarten by a surge in stay-over tourism. Hence, Curaçao recorded a real GDP expansion of 5.9% while the Sint Maarten economy grew by 5.1%,” notes CBCS president Richard Doornbosch.
Compared to the previous outlook in September, the estimate for Curaçao was revised by 0.4 percentage points due to a stronger than initially expected rebound of stay-over tourism in the second half of 2022. By contrast, the estimate for Sint Maarten was adjusted downward by 0.7 percentage points induced by a slower than initially anticipated recovery of both stay-over and cruise tourism, and delays in reconstruction projects, notably the Princess Juliana International Airport and the general hospital.
Curaçao’s estimated real GDP expansion in 2022 was the result of an increase in net foreign demand, moderated by a decline in domestic demand. “Net foreign demand rose in real terms as the gain in the export of goods & services outweighed the higher import bill. Meanwhile, domestic demand shrank on the back of lower private consumption, as the higher inflation affected consumers’ purchasing power. However, a rise in private investments, particularly in the tourism, wholesale & retail trade, utilities, and real estate sectors, combined with a slight increase in public spending moderated the decline in domestic demand”, Doornbosch explains.
Growth in Sint Maarten was sustained by net foreign demand and, to a lesser extent, domestic demand. “Net foreign demand contributed positively to real GDP due to a strong increase in the export of goods & services. In particular, foreign exchange earnings from stay-over tourism rose sharply in the first half of 2022, albeit leveling off in the second half of the year. However, a rise in the import of goods & services due mainly to increased tourism spending and higher private investments moderated the increase in net foreign demand”, the CBCS president points out. “Domestic demand rose as both private and public spending went up. The gain in private spending was driven by higher investments in, among other things, large commercial and residential projects, moderated by lower consumption as inflation dampened consumer demand. Meanwhile, public spending went up sustained by public consumption while investments continued to decline due to budgetary constraints”, he continues.
Growth is projected to soften across the monetary union in 2023 as global conditions are expected to remain challenging. Consistent with a lower projected real GDP expansion in the monetary union’s main trading partners, the 2023 growth forecast of both Curaçao and Sint Maarten has been revised down compared to the outlook of September 2022. “For Curaçao, the growth forecast has been cut by 0.2 percentage points to 2.7%. Meanwhile, real economic growth is projected to slow to 3.3% in Sint Maarten, entailing a 0.3 percentage point downward revision. Although still elevated, inflation is projected to decline to 4.5% in Curaçao and 4.2% in Sint Maarten”, Doornbosch points out.
The CBCS has also calculated the macroeconomic effects of the resumption of refining activities in Curaçao in the second quarter of 2023. “In this so-called impact scenario, real GDP in Curaçao is expected to increase by 5.9% in 2023. This is 3.2 percentage points higher than in the baseline scenario that does not include the reopening of the refinery. Over the medium term, the projected real GDP growth in the impact scenario will remain on average 3.5 percentage points higher than in the baseline scenario over the same period, as refining and investment activities of the refinery are expected to gradually increase”, Doornbosch explains.
Even though it can be concluded that a resumption of refining activities in Curaçao will considerably improve the medium-term economic outlook as reflected by a projected increase in economic activity and employment, Doornbosch cautions that the economic outcome will depend on several factors, including the development in international crude oil prices. “It should also be noted that sharp fluctuations in international crude oil prices will, with the planned business model, result in increased volatility on the current account of the balance of payments, posing risks to external stability”, Doornbosch concludes.
The complete text of the December 2022 Economic Bulletin is available on the CBCS website at
https://www.centralbank.cw/publications/economic-bulletins/2022.
Willemstad, December 15, 2022
CENTRALE BANK VAN CURACAO EN SINT MAARTEN
