By Roland O.B. van den Bergh
Globally, economies are influenced by geopolitical developments, wars, and the looming threat of a trade war. The potential consequences for small islands like Curaçao, Aruba, or Sint Maarten remain unclear, but for now, it appears that 2025 will not be significantly affected by these global challenges. As a result, a moderate economic growth rate is expected in 2025.
By 2024, the economic contraction caused by COVID-19 was fully neutralized, and Curaçao returned to pre-pandemic levels. Recovery on Curaçao took longer than on Aruba and Sint Maarten, primarily due to the significantly larger and faster recovering tourism sectors on these islands compared to others.
The relatively high real growth rate of 5.4 percent for Curaçao’s economy in 2024 was largely due to the recovery from the pandemic, as well as growth in the construction and tourism sectors. Tourism, along with the construction of second homes for foreigners, has seen tremendous growth.
While exact data is lacking, it seems that Curaçao is growing more strongly in this regard than Aruba, Sint Maarten, and many other Caribbean islands. However, this growth could have been even higher had there been sufficient construction capacity and labor in both the construction and tourism industries. This structural labor shortage limits the economic growth forecast for 2025, which is expected to be around 3.2 percent.
Tourism-Based Economy
In 2025, Curaçao is expected to further develop as a “one pillar economy” reliant on tourism. The once dominant sectors – refining, international financial services, and logistics – will likely continue to decline.
However, niches could emerge, allowing specific economic activities to develop on a smaller scale. These could include the creative sector, IT services, international education, maritime services, and the energy transition.
The potential contributions of the gaming sector, developments around 2Bays, the refinery owner, Bullenbaai, and the possibility of an offshore wind farm focused on hydrogen production remain uncertain and will vary in their impact on economic growth in 2025 and the following years.
The economic indicators presented by the Central Bank of Curaçao and Sint Maarten (CBCS) show a positive picture, though growth rates are expected to level off compared to 2024. Inflation is expected to decrease from 3.1 percent in 2024 to 2.5 percent in 2025. Unemployment is projected to decrease by 0.2 percent to 10.9 percent in 2025.
However, unemployment will remain structurally high, despite severe labor shortages in the construction, tourism, and related economic sectors. This is primarily due to issues with labor qualifications, work ethic, and the physical and mental condition of the unemployed.
The government’s finances are expected to show a surplus of 1.5 percent in 2025, despite higher spending, based on current policy plans. It’s noted that additional public investments in “good” public projects could have a significant impact on economic growth.
Growth and Its Distribution
Economic growth offers some room for the government and the private sector to implement structural improvements in social and societal areas. This is a hopeful prospect, but only if the additional income and profits benefit the entire population, not just the “happy few.” Discussions around social security, such as the 12-year freeze on AOV indexing, the structure of healthcare, the quality and output of education, the approach to aging, poverty reduction, and more, must translate into concrete policy with clear "roadmaps" for allocating additional resources.
Gifts for the “happy few,” such as tax holidays and the cancellation of tax debts, lead to a society where some on Curaçao are “more equal” than others. The customs department reported that exemptions from import duties and sales tax (part of the tax holiday facility for the “happy few”) cause the government to lose approximately NAf. 100 million annually, not including millions in lost corporate tax revenues.
Part of the increased government revenue should be used to create funds to address future emergencies. These funds should also be allocated to the energy transition and to mitigate the effects of climate change.
Building reserves for difficult times and major challenges has been a recommendation from the IMF for many years. The alternative is continued dependence on the Kingdom partner, the Netherlands, as seen during the pandemic.
The Rich Get Richer?
Within the business sector, salary disparities between top management, highly skilled professionals, and low-wage earners should be reduced. The BES islands have set the tone by significantly increasing the minimum wage. Large salary disparities are also evident in the healthcare sector and between public and private sector employees performing the same work.
The margins that some companies and entrepreneurs apply to their products and services contribute to the difficulty many people on the island face in making ends meet. Examples include financial and business services, housing rents, home purchases, food, auto parts, and construction materials. Corporate responsibility in these areas is often lacking.
For 2025, the key question remains: how will economic growth be distributed?
~ Roland O.B. van den Bergh is an economist and researcher. This article is written in a personal capacity. Data used is from the Economic Bulletin of December 2024 by the CBCS. ~
