Caribbean region caught in trap of low growth, high debt, and no access to capital
A “silent crisis” with virtually no economic growth has taken place in the Caribbean region over the past decade. This is caused by natural disasters, economic shocks, low competitiveness, high government debt and limited access to international capital and funds. The Corona crisis comes on top of this; without international help, social and economic life will deteriorate drastically with lower incomes and more poverty.
This is the main conclusion in the research report “Small Islands, Major Challenges” by Amsterdam Bureau for Economics, which was drawn up on behalf of the Commission for Kingdom Relations of the Dutch House of Representatives (Tweede Kamer der Staten Generaal). The research report was presented to the House of Representatives on the 14th of May 2020. The research purpose is the need of the Commission to gain insight into the economic potential of the Caribbean part of the Kingdom, and into the possibilities and the obstacles to utilizing this potential. An addendum has been added to the report that discusses the economic impact of the Corona crisis and what this means for the conclusions and recommendations of the report.
The prolonged lack of economic reforms has caused that Curaçao, Aruba and Sint Maarten are being hit by the Corona crisis when already faced with a weakened economic structure. Without a comprehensive reform program, the countries’ post-Corona growth path is likely to be below the pre-Corona growth path due to higher indebtedness, higher unemployment and reduced international demand for tourism.
On a positive note, Curaçao, Aruba and Sint Maarten have a favorable starting position compared to the region: a high level of income, open economies, extensive economic potential, strong institutions and the position in the Dutch Kingdom. Implementing a comprehensive reform program will make countries economically resilient, with a favorable economic outlook. Reforms should focus on the labor market, the business climate, the capital market, the public sector, healthcare and social security. A reform program takes a process of years; it is important that reforms are no longer postponed such that Curaçao, Aruba and Sint Maarten emerge stronger from the Corona crisis. Positive effects can already occur in the short term because of the positive signal that modernization of the economy has on investors and on markets.
In the Caribbean Netherlands, substantial socio-economic improvements have been achieved over the past decade. From now on, attention should focus more on strengthening the earning capacity of Bonaire, St. Eustatius and Saba.
Significant quality improvements and cost savings can be achieved in the Caribbean part of the Kingdom if government tasks will be performed together (i.e. at Kingdom level). The Kingdom can therefore gain economic strength and provide citizens and businesses with certainty that government tasks that are essential for socio-economic development are carried out adequately in all countries of the Kingdom. The Corona crisis has prompted reconsideration and optimization of the economic order in the Kingdom.
You can find the report “Small Islands, Major Challenges” here (in Dutch).
Would like to know more? Contact Koert van Buiren: k.vanbuiren@economisch-bureau.nl
or + 31- (0) 6-125 05 395
