Monday’s news that the Central Bank of Curaçao and St. Maarten (CBCS) predicts a 14.4 per cent increase in St. Maarten’s gross domestic product (GDP) for next year was understandably met with some enthusiasm, after 18 months of unprecedented coronavirus-related crisis. Keep in mind that the country suffered a contraction of no less than 22.1 per cent for 2020 while a modest expansion of 3.4 per cent is expected this year, so 2022 should remain at 4.3 per cent under pre-pandemic 2019 levels.
Nevertheless, the prospect of a quick rebound by the dominant hospitality industry inspires much needed confidence in the immediate future. That positive outlook is obviously backed by early bookings and perceived demand for the destination.
CBCS says all this does not ensure sustainable recovery. Growth in the monetary union was below potential already before the outbreak of COVID-19, due largely to “our macroeconomic weakness, including the functioning of the capital and labour markets, complex administrative procedures and high cost of doing business.”
These are obviously issues to be addressed as part of the so-called country package of restructuring measures with financing from the Netherlands under supervision of the Caribbean Body for Reform and Development COHO. However, a word of caution is in order.
Several proposals to enhance government revenues, for example, entail risks that have to do with St. Maarten’s unique situation of an island shared with French territory and open borders between the two sides. It was encouraging to note that at least the International Monetary Fund (IMF) recognised this reality in advising against a value added tax (VAT).
Local circumstances and the very nature of the tourism economy must be well-considered before taking any steps that intervene in the private sector marketplace, so as not to undermine this still fragile restoration of the people’s livelihood.
