WASHINGTON - According to the International Monetary Fund (IMF) the COVID-19 pandemic inflicted another major shock on the economies of Curaçao and Sint Maarten. Despite the substantial response measures financed by The Netherlands, the economic contraction in 2020 was severe. The outlook remains challenging and subject to elevated uncertainty and risks. Important near-term priorities include reaching vaccination objectives, supporting measures as needed, protecting the vulnerable, and setting the basis for inclusive recovery and medium-term sustainability. The agreements with The Netherlands (landspakketen) provide a window of opportunity to improve the overall policy framework needed to support the exchange rate peg, strengthen resilience, and raise potential economic growth.
Before the pandemic, both countries had already experienced major economic shocks. Curaçao suffered spillovers from the crisis in Venezuela, leading to a decline of the oil refining sector—a major economic pillar—and contributing to a protracted recession. Sint Maarten has not fully recovered from catastrophic hurricanes in 2017. In both countries, the real GDP in 2019 was lower than in 2010.
The pandemic caused a collapse of tourism and inflicted a major blow to the economy despite significant support measures. The authorities successfully contained the spread of COVID-19 in the first half of 2020, but the necessary containment measures brought tourism and economic activity to a halt. Both countries swiftly designed and implemented comprehensive packages of response measures featuring payroll subsidies, support for the self-employed, and unemployment benefits. The Netherlands extended significant liquidity support in 2020 (13.3 percent of the monetary union’s GDP), rolled over maturing debt, and provided critical in-kind support for the health sector, including COVID-19 vaccines, and food packages for the vulnerable. The fiscal support measures were critical for saving lives and livelihoods but increased fiscal deficits and debt significantly.