PHILIPSBURG--The Central Bank of Cura�ao and St. Maarten estimates no economic growth for 2010 for St. Maarten, compared to a 0.9 per cent contraction in 2009 and for Cura�ao a rather weak economic growth of 0.4 per cent in 2010, after the 0.5 per cent contraction in 2009.
The Central Bank traditionally looks at the opening of a new year as an appropriate moment to evaluate the economic developments in the past year and looks at the challenges ahead. According to the bank, such an assessment is particularly opportune because St. Maarten and Cura�ao are now autonomous countries and fiscal discipline should be stressed.
"Only by maintaining fiscal discipline can the stability of the monetary union and its currency be safeguarded. This stability is crucial for successfully building up our new countries, attaining a sustainable higher level of growth, and increasing the welfare of our citizens," the bank stated in a release.
St. Maarten and Cura�ao "share" the Central Bank in a so-called "monetary union" which, in order to succeed, must focus on policy coordination. Also, both countries will have to harmonize legislation in the areas of monetary, financial sector, and financial integrity supervision.
According to the bank, Cura�ao and St. Maarten had a sound starting position for the monetary union thanks to the debt relief programme. "However, these two countries should adhere to the agreed budgetary rules to maintain sound public finances," the bank stated.
Both Cura�ao and St. Maarten, the bank stressed, will have to improve their investment climate to achieve strong and sustainable economic growth. Important areas that should be addressed include government bureaucracy, the flexibility of the labour market, and the mismatch between labour demand and supply.
Moreover, an assessment by the IMF of both Cura�ao's and St. Maarten's compliance with the international standards on Anti Money Laundering and Combating of Terrorism Financing is crucial.
For St. Maarten, the overriding concern remains the presentation of a balanced budget, consistent with institution building and sustainable economic growth. The inherent opposing pressures that those objectives bring to bear on the budget are perhaps the main challenges that St. Maarten faces in the short and medium term.
Additionally, given the budgetary constraint, St. Maarten must look for ways to enhance and broaden its income base.
"A reform of the tax system and improvement of the tax collection in St. Maarten should be a major element of a sound medium-term policy framework aimed at balancing fiscal and growth objectives," the bank stated.
The bank said the implementation of the debt relief programme continued to have a significant impact on the economies of Cura�ao and St. Maarten in 2010. The transfer of debt relief grants by the Dutch government limited the worsening of the current account of our balance of payments.
As a result of the debt relief, Cura�ao registered a cash surplus in 2010. In addition, the public sector debt of Cura�ao declined considerably as a result of the debt relief. Cura�ao's real GDP growth is projected to remain subdued at 0.6 per cent in 2011. Meanwhile, St. Maarten's economy is expected to expand slightly by 0.3 per cent.
For Cura�ao, given the favourable fiscal situation, the overriding objective remains to maintain this situation moving ahead. "This requires a balanced fiscal budget and adherence to the rules of fiscal discipline and good corporate governance. Maintaining the sound starting position creates a solid foundation for developing a broad-based long-term vision on the structure and sustainable growth of the economy," the bank explained.
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