IMF cautions of slowing growth, persistent inequality in St. Maarten

WASHINGTON--While Sint Maarten continues to benefit from strong tourism-driven growth, the IMF emphasized that its long-term trajectory is challenged by slowing potential growth, persistent inequality, and structural weaknesses.

These concerns were highlighted in the IMF Executive Board’s conclusion of the 2025 Article IV consultation discussions with The Kingdom of the Netherlands—Curaçao and St. Maarten on September 2, 2025. Building fiscal space, accelerating healthcare reforms, strengthening institutions, and modernizing infrastructure are seen as essential steps to secure resilience.

The IMF says barring major outside shocks, St. Maarten’s economy will keep growing in 2025, with a 3 percent boost expected thanks to more tourists and new hotels. But over time, growth will likely slow to around 2 percent as the island reaches the limits of how many visitors it can handle. Prices are expected to rise by about 3.3 percent in 2025, then ease back to about 2 percent in the following years. Government finances will tighten temporarily because of big investments, but the country’s trade balance is expected to improve and even show a small surplus in the medium term.

The IMF also warned of risks: if the global economy slows down more than expected, or if trade and investment are disrupted, tourism could suffer and prices could rise. On the other hand, if St. Maarten succeeds in moving ahead quickly with its planned infrastructure projects, the economy could grow even faster.

𝐒𝐮𝐬𝐭𝐚𝐢𝐧𝐢𝐧𝐠 𝐆𝐫𝐨𝐰𝐭𝐡 𝐁𝐞𝐲𝐨𝐧𝐝 𝐭𝐡𝐞 𝐓𝐫𝐮𝐬𝐭 𝐅𝐮𝐧𝐝

With Trust Fund projects winding down, the IMF emphasized the need for a pivot toward private and local government investment to sustain momentum. Delayed hotel developments and new government facilities are expected to support near-term growth. However, uncertainty surrounds the government’s ability to execute projects after the Trust Fund’s closure, raising concerns about potential long-term growth capacity.

𝐓𝐚𝐜𝐤𝐥𝐢𝐧𝐠 𝐈𝐧𝐞𝐪𝐮𝐚𝐥𝐢𝐭𝐲 𝐓𝐡𝐫𝐨𝐮𝐠𝐡 𝐅𝐢𝐬𝐜𝐚𝐥 𝐏𝐨𝐥𝐢𝐜𝐲

The IMF stressed that Sint Maarten’s relatively high inequality, combined with lower life expectancy and higher adolescent fertility compared with countries of the same size and scale, demands urgent attention. To expand fiscal space for social development, the Fund recommended equitable revenue mobilization measures. These include a planned tourism levy and dividend tax, improved compliance for short-term rentals, taxation of casino turnover and winnings, and continued tax administration reforms. The IMF warned that any consideration of a bank transaction tax must weigh potential regressive effects.

𝐔𝐫𝐠𝐞𝐧𝐭 𝐇𝐞𝐚𝐥𝐭𝐡𝐜𝐚𝐫𝐞 𝐑𝐞𝐟𝐨𝐫𝐦

Healthcare funds in St. Maarten face significant deficits, having consumed nearly half of SZV reserves over the past decade. The IMF called for reforms to be expedited, including the introduction of general health insurance, rationalizing benefits, strengthening preventive care, and expanding coverage to informal and self-employed workers. A medium-term plan is also needed to address operating costs for the new hospital and mental health facility.

𝐁𝐮𝐢𝐥𝐝𝐢𝐧𝐠 𝐈𝐧𝐬𝐭𝐢𝐭𝐮𝐭𝐢𝐨𝐧𝐚𝐥 𝐂𝐚𝐩𝐚𝐜𝐢𝐭𝐲

The IMF recommended absorbing knowledge from Trust Fund operations and creating a centralized planning unit to strengthen project execution. Complementary steps include improved public financial management, medium-term budgeting frameworks, and competitive wage structures to attract skilled professionals. Without these reforms, capacity constraints could hold back investment planning and long-term growth.

𝐒𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐚𝐥 𝐑𝐞𝐟𝐨𝐫𝐦𝐬 𝐟𝐨𝐫 𝐋𝐨𝐧𝐠-𝐓𝐞𝐫𝐦 𝐂𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐢𝐯𝐞𝐧𝐞𝐬𝐬

Sustaining Sint Maarten’s position as a leading tourism destination requires significant investments in infrastructure, including roads, waste management, and electricity supply. The IMF urged a shift from focusing on tourist volume to enhancing value-added services. Accelerating permitting processes and digitalization will unlock delayed investments. Electricity sector reforms, including empowering the regulator, transitioning to renewables, and strengthening governance through UNCAC (United Nations Convention against Corruption), are also considered urgent. Labor market policies should prioritize job creation in the private sector, formalization, and skills training.

𝐌𝐨𝐧𝐞𝐭𝐚𝐫𝐲 𝐔𝐧𝐢𝐨𝐧 𝐎𝐮𝐭𝐥𝐨𝐨𝐤

For the broader Monetary Union of Curaçao and Sint Maarten, the current account deficit is projected to remain elevated, though gradually narrowing to about 10 percent of GDP in the medium term. Reserves are expected to remain stable and adequate. While the external position is weaker than fundamentals suggest, measurement gaps add uncertainty.

The Central Bank of Curaçao and Sint Maarten has kept its benchmark rate steady since late 2024, anchoring the currency peg. However, monetary policy transmission remains weak due to excess liquidity and inactive interbank markets. Lending growth is driven almost entirely by mortgages in Curaçao, while real overall credit growth in the Union remains negative.

Banks remain well-capitalized and liquid, though profitability lags the regional median. Risks have declined with the resolution of ENNIA and progress on reforms, but rapid mortgage lending growth requires close monitoring. Macroprudential tools under development include countercyclical capital buffers and loan-to-value limits.

𝐒𝐭𝐫𝐞𝐧𝐠𝐭𝐡𝐞𝐧𝐢𝐧𝐠 𝐀𝐌𝐋/𝐂𝐅𝐓 𝐅𝐫𝐚𝐦𝐞𝐰𝐨𝐫𝐤𝐬

The IMF stressed that the anti-money laundering and counter-terrorist financing (AML/CFT) frameworks of Curaçao and Sint Maarten require significant improvement. Both countries remain under CFATF enhanced follow-up and must act quickly to implement corrective measures. Priorities include operationalizing beneficial ownership registers, strengthening preventive measures in high-risk sectors such as casinos, and accelerating work on outstanding deficiencies.

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