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International Monetary Fund. Western Hemisphere Dept.

exchange rate pressures. The recovery in Sint Maarten is vulnerable to delays in key projects such as airport reconstruction and frequent changes in government that impede the implementation of key reforms. Both countries remain vulnerable to a slowdown in main trading partners. Improving the functioning of the Union requires better policy frameworks, stronger buffers and a consistent and credible macro framework based on better data. A significant improvement in data availability and quality is needed as current gaps hamper effective macroeconomic analysis and

International Monetary Fund. Western Hemisphere Dept.
This 2019 Article IV Consultation focuses on Curaçao and Sint Maarten’s near and medium-term challenges and policy priorities and was prepared before coronavirus disease 2019 became a global pandemic and resulted in unprecedented strains in global trade, commodity and financial markets. The fiscal position in Curaçao improved in the past two years, in part due to implemented fiscal measures. Both Curaçao and Sint Maarten would benefit from introducing a Fiscal Responsibility Framework. It could incorporate a central government debt ratio as a long-term anchor and operational rules calibrated to meet it. The report suggests that risks in the financial sector need to be addressed as a matter of priority. The authorities should develop a strategy for addressing financial sector vulnerabilities with the objective of preserving financial stability while minimizing fiscal costs. Significant strengthening of supervision and a complete overhaul of the bank resolution framework are also urgently needed. An across-the board improvement in the governance framework should be a key priority in both countries. Vulnerabilities in the financial system point to the need to strengthen governance in the financial sector.
International Monetary Fund. Western Hemisphere Dept.

capacity . A. Enhancing Potential Growth and Overcoming Small Island Constraints 15. The Union is facing structural rigidities . Both countries are saddled with long-standing structural impediments such as cumbersome permit processes, rigid labor market regulations, skills mismatches, infrastructure bottlenecks and slow implementation of structural reforms. These factors weigh on the Union’s labor productivity, especially in Curaçao, and reduce its ability to adjust to shocks, as highlighted by the uneven post-hurricane recovery in Sint Maarten. Curasao

International Monetary Fund. Western Hemisphere Dept.

clear planning and decision-making process as well as adequate project appraisal incorporating risks from climate change. Sint Maarten The recovery in Sint Maarten is underway. Stayover tourism has exceeded pre-pandemic levels and cruise tourism is rebounding. Public investment supported by the Trust Fund is raising the prospect of matching the level of output seen before the 2017 hurricanes by the end of the forecast horizon. Nevertheless, downside risks cloud the outlook. Global price pressures are making a mark on the island and threatening real wages and

International Monetary Fund. Western Hemisphere Dept.

-term outlook remains challenging, with zero growth in Curaçao and only moderate recovery in Sint Maarten in 2021. A stronger recovery is expected in 2022–24 as tourism approaches pre-pandemic levels. Weak fiscal revenues and the need for supporting measures imply a further increase in public debt. The outlook for both countries is subject to elevated uncertainty and risks given the high dependence on tourism. Policy recommendations . Near-term priorities include reaching vaccination objectives, protecting the vulnerable, supporting the economy as needed, and setting the

International Monetary Fund. Western Hemisphere Dept.
The economies of Curaçao and Sint Maarten are recovering from the pandemic but facing multiple challenges, including spillovers from the war in Ukraine. Curaçao was in a protracted recession even before the pandemic due to spillovers from the Venezuelan crisis. Sint Maarten needs to fully recover not only from the pandemic, but also from the devastating 2017 hurricanes.
International Monetary Fund. Western Hemisphere Dept.

to this level after an omicron-related decline. Stayover and Cruise Arrivals, Percent of 2019 (Percent, y/y) Sources: CBCS and Fund staff calculations. 32. Despite the continuing impact of Covid-19, staff estimate that recovery in Sint Maarten is well underway, with growth in 2021 at 8 percent . Tourism provided the largest boost to growth while a small pickup in both public (including the Trust Fund) and private investment helped offset continued decline in consumption. Unemployment is estimated to have risen to around 25 percent in 2021 as the

International Monetary Fund. Western Hemisphere Dept.
The COVID-19 pandemic inflicted another major shock on the economies of Curaçao and Sint Maarten, which followed category 5 hurricanes in Sint Maarten in 2017 and the spillovers of the Venezuelan crisis on Curaçao. Despite the substantial response measures financed by The Netherlands, the economic contraction in 2020 was severe.