Although fixing the nation’s public finances clearly has priority, the balance of payments also requires attention especially in the long run. The Central Bank of Curaçao and St. Maarten (CBCS) said in
Monday’s paper that the monetary union’s deficit on the current account would widen in 2016.
The past year in reality wasn’t so bad and sufficient external capital is available to fund the shortfalls. The gap narrowed to 7.9 per cent of the Gross Domestic Product (GDP) compared to 9.8 in 2014, but stayed well above the desired 5 per cent standard.
The import coverage went up from 3.9 per cent 12 months ago to 4.3 per cent last October, which contributes to keeping the Antillean guilder stable. If corrected for foreign exchange revenues from Government bond issues mostly bought by the Netherlands, the number actually would be around 3.5, still higher than the international three-month benchmark.
However, while the shared local currency is, of course, pegged to the US dollar, a structural negative trade balance could affect that position sooner or later, diminish the people’s spending power through devaluation and result in massive price inflation, with all possible social consequences. CBCS also concludes the economic performance of the two countries alone has not led to a sustainable improvement in this regard.
A decline in transhipment free zone exports especially by Curaçao was called one of the factors, but for St. Maarten a slow increase in visitor spending is the main issue. The Dutch side will end 2015 with a growth rate of 0.3 per cent, down from 1.5 per cent the year before.
The report mentions a drop in public sector investments and consumption probably due to the budgetary restraints. The business community showed weakened activities in the hotel and restaurant, transport, storage and communication fields, while real added value contracted in financial services, manufacturing and construction.
The idea here is certainly not to spread doom and gloom during the holiday season, but rather to make people aware of the current situation. The great thing about outlooks such as the one of CBCS is that they concern the future, which still can be shaped.
A boost of the tourism economy on “The Friendly Island” could go a long way towards addressing the problem. That requires promotion, marketing and grasping good opportunities that may present themselves, but above all a quality product and excellent service enabling the destination to get more “heads in beds.”
