SINT MAARTEN (PHILIPSBURG) - In 2020, the world economy was hit severely by the COVID-19 pandemic and measures implemented to contain the spread of the virus. As a result, real output dropped in both the advanced and emerging & developing economies. The monetary union of Curaçao and Sint Maarten also was deeply affected by the pandemic.
“Even though both countries were relatively successful in containing the local spread of the coronavirus through stringent measures, this success came at high economic and social costs”, stated Richard Doornbosch, president of the Centrale Bank van Curaçao and Sint Maarten (CBCS) in the 2020 Annual Report.
Particularly during the second quarter of 2020, economic activity in both Curaçao and Sint Maarten came practically to a standstill as both countries implemented a border closure that lasted approximately three months and a total lockdown of approximately 6 weeks.
“Despite the later easing of these measures, economic activity, particularly in the tourism industry, remained substantially lower than before the crisis. Consequently, real GDP dropped by an unprecedented 19.3% in Curaçao and 22.4% in Sint Maarten”, explained Doornbosch.
Curaçao 2016 2017 2018 2019 2020 Domestic demand 0.2 -0.4 -1.2 -3.7 -11.3 Net foreign demand -1.1 -1.2 -1.2 0.3 -7.8 GDP -1.0 -1.7 -2.2 -3.4 -19.3
Sint Maarten 2016 2017 2018 2019 2020 Domestic demand 5.1 1.5 -0.2 0.8 -9.8 Net foreign demand -4.0 -9.3 -7.1 8.2 -12.6 GDP 0.5 -5.8 -6.6 8.2 -22.4
An analysis by sector shows that real value added dropped in all sectors of the economies of Curaçao and Sint Maarten.
According to Doornbosch, the decline was most pronounced in the manufacturing, restaurants & hotels, wholesale & retail trade, and transport, storage, & communication sectors. Real output dropped significantly in Curaçao’s manufacturing sector due to a decline in refining activities following the closure of the Isla refinery after the expiration of the lease contract with Venezuelan state-owned oil company, PDVSA, in December 2019.
In addition, ship repair activities decreased. The contraction in the manufacturing sector in Sint Maarten reflected a decline in yacht repair and service activities in line with the lower number of yachts that visited the island.
The contraction in the restaurants & hotels sector was caused primarily by the containment measures that were imposed amid the pandemic. Furthermore, the demand for international travel dropped and the cruise industry was completely shut down after the first quarter of 2020.
Hence, the number of stay-over visitors, the number of cruise tourists, the number of stay-over nights, and the hotel occupancy rate dropped significantly. In the wholesale & retail trade sector, real value added fell considerably on the back of the drop in domestic demand and the decline in tourism spending.
The negative outcome in the transport, storage, & communication sector reflected a decline in both airport-related and harbor activities. Airport-related activities shrank as a result of a sharp decline in total passenger traffic and the number of commercial landings while the contraction at the harbor was consistent with the decline in the number of ships piloted into the port and fewer container movements.
Economic recovery is projected to be moderate in 2021 with real GDP growth rates of 0.1% in Curaçao and 3.4% in Sint Maarten. The marginal recovery in Curacao is explained by another six-week lockdown during March – May. It is expected that the recovery will gain speed in 2022 with growth rates of 6.2% in Curaçao and 14.4% in Sint Maarten.
“The path of economic recovery, however, is uncertain as it depends on how the virus develops and the speed of the vaccine roll-out. Therefore, it is important that both countries continue to make progress in their vaccination programs to be better protected against the virus allowing for less restrictions and facilitating a faster economic recovery”, Richard Doornbosch concluded.
The complete text of the 2020 Annual Report can be viewed on the CBCS-website at www.centralbank.cw under the Publications section.