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~Economic recovery gathers pace across monetary union~

WILLEMSTAD/PHILIPSBURG:--- The economic recovery gathered pace across the monetary union in 2022 with real GSPArty/21/democratic-party'>DP expaNDing by 7.9% in Curaao aND 9.8% in Sint Maarten, stated the President of the Centrale Bank van Curaao en Sint Maarten (CBCS), Richard Doornbosch, in CBCSs Economic Bulletin June 2023. In both countries, growth was driven primarily by an increase in net foreign demaND, along with a positive contribution from domestic demaND. Net foreign demaND rose in real terms sustained by a sharp increase in exports as reflected by robust growth in foreign exchange earninSPArty/9/general-solidaire'>GS from stay-over tourism, moderated by a higher import bill, he explained. Domestic demaND rose in both countries on the account of higher private speNDing while public speNDing shrank. The gain in private speNDing was driven solely by investments, as consumption was affected by a decline in purchasing power due to higher inflation.When looked at from the production side, the restaurants & hotels, transport, storage & communication, real estate, renting & business activities, wholesale & retail trade, aND construction sectors were the main drivers of the economic growth seen in both countries in 2022.Meanwhile, inflation accelerated in both Curaao aND Sint Maarten on the back of soaring interSPArty/23/national-alliance'>NAtioSPArty/23/national-alliance'>NAl commodity prices. To limit the rise in domestic prices, the governments of both countries temporarily reduced taxes on gasoline aND gasoil halfway through the year. Nevertheless, inflation rose significantly in Curaao reaching 7.4% in 2022. In Sint Maarten, by contrast, inflatioSPArty/23/national-alliance'>NAry pressures remained relatively contained with average consumer prices increasing by 3.8%, Doornbosch pointed out.Real GSPArty/21/democratic-party'>DP growth is expected to slow in Curaao to 3.4% in 2023. Compared with the March 2023 outlook, the forecast has been revised up by 0.2 percentage points due to a stronger increase in domestic demaND on the back of lower expected inflation. Inflation in Curaao is set to drop to 4.0% in 2023, a downward revision of 0.6 percentage points compared to the previous outlook. The revision reflects primarily a sharper projected decline in interSPArty/23/national-alliance'>NAtioSPArty/23/national-alliance'>NAl oil prices, Doornbosch said.Turning to Sint Maarten, the CBCS president outlined that, real GSPArty/21/democratic-party'>DP growth will ease to 3.2% in 2023. The 2023 growth forecast entails an upward adjustment of 0.9 percentage points from the previous outlook due to a stronger than initially projected increase in public demaND. Even though Sint Maartens real GSPArty/21/democratic-party'>DP already reached the pre-paNDemic level in 2022, it is not expected to reach the pre-Hurricane Irma level before 2024. Meanwhile, inflation will remain practically unchangedat 3.7% in 2023, assuming a delayed passthrough of the increase in interSPArty/23/national-alliance'>NAtioSPArty/23/national-alliance'>NAl commodity prices in Sint Maartens domestic prices.Doornbosch cautioned, however, that the outlook is subject to significant risks which are skewed downward. The principal exterSPArty/23/national-alliance'>NAl risks inclUDe fiSPArty/23/national-alliance'>NAncial market distress caused by further monetary policy tightening that could result in a global recession, he said, Furthermore, higher interSPArty/23/national-alliance'>NAtioSPArty/23/national-alliance'>NAl interest rates could trigger an outflow of reserves due to increased net portfolio investments abroad. Similarly, heightened geopolitical tensions, notably the war in Ukraine, could impact sUPPly chains aND increase commodity prices leading to higher inflation across the monetary union. In addition, extreme weather coNDitions due to climate change remain an ever-present risk to the outlook.Domestically, risks to the outlook inclUDe failing to pass through the decline in interSPArty/23/national-alliance'>NAtioSPArty/23/national-alliance'>NAl oil prices in domestic fuel prices that would result in additioSPArty/23/national-alliance'>NAl inflatioSPArty/23/national-alliance'>NAry pressures aND an appreciation of the real exchange rate making the countries less competitive. Other factors that could affect the medium-term growth path of Curaao aND Sint Maarten are the outcomes of the Mutual Assessment by the CFATF, fiNDing a resolution for insurance company ENNIA, the coNDitions for refiSPArty/23/national-alliance'>NAncing the liquidity sUPPort received amid the paNDemic, aND delays in the execution of major construction projects, especially in Sint Maarten. Meanwhile, the successful implementation of the reforms as agreed upon in the mutual agreement recently signed with the NetherlaNDs could result in a higher growth path, Doornbosch conclUDed.The Economic Bulletin June 2023 is available on the CBCS website athttps://www.centralbank.cw/publications/economic-bulletins/2023.Willemstad, June 27, 2023CENTRALE BANK VAN CURACAO EN SINT MAARTEN
General Solidaire [GS] mentioned 1 time
Democratic Party [DP] mentioned 4 times
National Alliance [NA] mentioned 20 times
St Maarten Patriotic Alliance [SPA] mentioned 16 times
United People's Party [UPP] mentioned 2 times
New Direction St. Martin [ND] mentioned 24 times
United Democrates 2018 [UD] mentioned 3 times