WILLEMSTAD - According to the International Monetary Fund, despite both Curaçao and Sint Maarten being oriented towards tourism, the islands also face conditions that make them vulnerable to asymmetric shocks.
The small size of the two economies poses significant challenges for diversification and make them vulnerable to shocks and therefore macroeconomic volatility. Both countries are tourism-oriented, suggesting that their external shocks should be correlated.
However, they are geographically far apart and face different risks. Curaçao’s closeness to Venezuela, both in terms of geography and economic linkages, made it vulnerable to spillovers from the protracted Venezuelan crisis. Sint Maarten’s location in the hurricane belt increases the likelihood of periodic hurricanes, as demonstrated by catastrophic damages from the 2017 hurricanes.
In addition, there are significant differences in economic structure related to the weight of the tourism sector, the origin of tourists and in international economic linkages. Whereas Sint Maarten is predominantly tourism-oriented and mostly tied to the U.S. in terms of its international economic linkages, Curaçao is more diversified in terms of both its economic structure and linkages. This makes Curaçao and Sint Maarten vulnerable to differential shocks in addition to the common global shocks such as the 2020-21 pandemic.