Despite increased inflation Recovery of economic activity to continue across the monetary union
Willemstad/Philipsburg – Due to the soaring commodity prices, inflation is expected to pick up strongly in 2022 and remain elevated in 2023. “Even though the elevated inflation erodes consumers’ purchasing power and, hence, private consumption, economic activity is projected to continue to recover across the monetary union. In Curaçao, real GDP is projected to increase by 5.5% in 2022, while Sint Maarten will record an expansion of 5.8%. Meanwhile, growth will moderate somewhat in 2023 with the economies of Curaçao and Sint Maarten growing by 2.9% and 3.6%, respectively”, explains Centrale Bank van Curaçao and Sint Maarten (CBCS) President Richard Doornbosch. In today’s published Economic Bulletin of September 2022, the CBCS presents its revised economic outlook for Curaçao and Sint Maarten.
The economic indicators of the first quarter of 2022 reveal that both Curaçao and Sint Maarten continue to benefit from the reopening of the economy and easing of travel restrictions. “Sustained by a strong recovery of stay-over tourism, economic activity rebounded strongly across the monetary union with real GDP expanding by 19.0% in Curaçao and 19.9% in Sint Maarten in the January – March period of 2022”, according to Doornbosch. “In both countries, net foreign demand was the main driver of this robust expansion as exports rose at a faster pace than imports. Albeit modestly, private demand, specifically investments, also contributed to the real GDP growth. By contrast, public demand dropped. Sectoral data show that, consistent with the strong growth of stay-over arrivals, the restaurants & hotels and transport, storage & communication sectors contributed most to the real GDP expansion in Curaçao and Sint Maarten”, he continues.
Recent data show that the rebound of stay-over tourism has continued in the second quarter of 2022. “In Curaçao, the number of stay-over tourists even surpassed the pre-pandemic second quarter level of 2019. Against this background, the CBCS revised up its growth forecast for Curaçao by 0.3 percentage point to 5.5% from the June outlook. For Sint Maarten, by contrast, the growth forecast was adjusted downward by 0.4 percentage point to 5.8% as stay-over tourism growth has levelled off since March 2022”, he points out. He adds that for both countries, the outlook is conservatively predicated on the assumption that the growth in stay-over tourism will slow in the second half of the year as increased inflationary pressures will curb purchasing power and, as a result, weaken demand for travelling abroad in the main source markets, notably the United States and the Netherlands.
The worsening external environment has also induced a downward revision of the real GDP outlook for 2023. The forecast for Curaçao has been reduced by 0.1 percentage point from the projection in June while for Sint Maarten it was revised down by 0.3 percentage point. Consistent with the projected economic growth, the fiscal stance in both countries is expected to improve, with the current budget deficit and debt-to-GDP ratio gradually declining over the forecast horizon,” CBCS President Richard Doornbosch concludes.
The complete text of the September 2022 Economic Bulletin is available on the CBCS website at https://www.centralbank.cw/publications/economic-bulletins/2022
