A Cold Shower: we can easily exchange Curacao for Aruba, with higher numbers
IMF predicts Curacao’s economic recovery, in 2023 at the earliest
Warning against the adverse effect of temporary savings
Some pearls from an article by AntilliaansDagblad
The Curaçao economy shrunk by 23% as a result of the Corona virus. And the IMF predicts, that it will probably reach the 2019 level of activity by 2023, at the earliest.
The IMP is recommending long-term budgetary policy, instead of temporary savings, which were a condition to aid by the Dutch State Secretary Raymond Knops, Interior and Kingdom Relations, who advocated immediate austerity measures in the short term.
According to the International Monetary Fund (IMF), fiscal policies should be “balanced,” and adjusted, and public-debt should be kept sustainable, in the medium term.
The IMF is against excessive debt build-up, instead the Washington Institute strongly advocates “vigorous action to implement structural reforms.”
This includes reform of the labor market and legislation: Shortening working hours and the possibility of making changes to help avoid the risk of bankruptcies on a large scale.
Also, flexibility will help people find jobs faster once recovery begins.
The IMF also expects a 25 percent shrinking for Sint Maarten, which also suffered a huge impact.
The IMF assumes that the support measures by the Dutch will be necessary until December 2020, and then estimates Curaçao’s financial needs at 852 million, and 429 million for Sint Maarten.
“There is a risk that emergency aid will be needed for longer,” the report says.
Basically, Curaçao’s government debt will rise from 54% of GDP in 2019 to 94.3% this year.
(Aruba’s is much higher)
The latest IMF report contains some good news, mass layoffs have so far been largely preventable, partly due to support measures involving 17,000 jobs, but there are indications of frequent job losses, in spite the loon subsidies.
In April and May, 3,500 employees were laid off by Curaçao companies, almost 5 percent of the working population.
In Curaçao, tax revenues decreased by 23% in April and 26% less social contributions were received.
The IMF doesn’t see tourists returning: There will be no significant amount of overnight tourists in the second and third quarters of 2020 and the last quarter – October, November and December – is expected to close at 25%.
Next year, in 2021, it is expected to reach 50% and 75% in 2022, after which the level of 2019 will not be reached until 2023. Most hotels and tourism-related businesses will not survive, and the refinery will not be operational again until 2021 at the earliest. The IMF believes that only half of the former Isla refinery staffer can remain, causing 10% additional unemployment.
To summarize, all economic expectations involve “major uncertainties and risks”. The path of recovery for tourism is “extremely uncertain” and the risk of a significant “brain drain” of higher-skilled workers to the Netherlands, is particularly eminent.
The experts also call it extremely important to support small and medium-sized enterprises (SMEs) in their struggle to survive.
Exports of goods and services – including tourism – will decline by 60% in 2020, while imports will fall by nearly 40%, as food consumption shocks absorb the impact related to consumption.
Assuming that the financing requirements are met by Dutch liquidity support, the international, foreign, reserves expressed in dollars will remain stable this year.