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Economic Prospects For Curaçao
The basic research questions in this report are: how does the private sector expect the Curaçao economy to develop in the short and medium term? And how will businesses behave, how will the private sector of Curaçao develop and proceed from now, the next couple of years till 2019?
How will the private sector develop in Curacao in the years to come?
This was the question that the Platform Dutch Caribbean Economist asked a hundred entrepreneurs, CEOs and CFOs who manage businesses in Curacao. During the interviews the focus was on their opinions and ideas about the economic prospects for their company, their sector and for the Curaçao economy.
This report, Economic Prospects for Curaçao, summarizes the results of these in-depth interviews which were held in the summer of 2012.
Main research findings:
- Most entrepreneurs are not optimistic about the short-term economic outlook for the island and their sector. Only few are positive about their business prospects. In most sectors the turnover is expected to decrease. The only exception could be tourism: its outlook for the near future seems stable to slightly positive. Surprisingly the majority of entrepreneurs are more positive about their own business, as compared to the sector’s performance.
- Almost all entrepreneurs expect their business results to worsen as a result of a lower turnover, more competition, increased cost of doing business. Collection problems are expected to increase.
- Business confidence is weak, and the willingness to invest is low. Many entrepreneurs indicate company investment policies are cautious. For most, this implies that no large investments are foreseen in the near future. Only those investments strictly necessary to maintain business, will be carried out. The few companies considering larger investment on the island are forced to do so to remain competitive or to get in better shape for when the world and island economy picks up once again. Some will invest in other branches or on other islands.
- Most businesses expect employment levels in their sector to decrease or at best remain stable. In most cases employees retiring or leaving the company voluntarily will not be replaced. In some cases forced lay-offs are not ruled out. Many entrepreneurs want to operate their company more flexibly as a result of more uncertainties and fluctuations in demand. In the medium and longer term, this will reduce job security for many employees.
- Consumer confidence is low according to the businesses, which depend on the local market. Consumer spending behavior is expected to be increasingly cautious: the purchasing power and willingness to spend is expected to decline.
- External factors mentioned as important determinants of this short term economic outlook are: the slowly recovering and still fragile world economy, and the persistent uncertainty in the Eurozone economies. Important domestic factors mentioned are the fragility of the local economy, the political instability, the budgetary problems, and the decreasing credit opportunities. In addition, many expect that the strained relations between Curaçao and the Netherlands will sooner or later harm the island economy.
- The economic outlook for the medium term is often somewhat more positive or less negative.
- Many respondents hope that both the global and local economy will pick up by 2015. Most respondents do remain cautious, and expect international and local market uncertainties to continue for some time, at least till 2014. In addition, the need for fiscal cutbacks is expected to further dampen the growth of the Curaçao economy. Lack of government action and prolonged political instability is feared to put the necessary recovery on hold.
- In this business environment, respondents consider various strategies to deal with the risks and uncertainties facing the Curacao economy. For example, they increase their focus on the quality of service and the costs of production, improve the flexibility of their organization, or plan to expand, to include other product and geographical markets.
Based on the interviews, some entrepreneurs want to close or sell their business. Some will invest to be prepared for better times to come; some will invest in new opportunities. However, by far most entrepreneurs will ‘wait and see’ and adapt a little to survive the next couple of years.
The overall economic prospect is not positive. Based on the interviews with many entrepreneurs on the island it seems realistic to suppose that developments in the private sector will further worsen until at least 2015. Only a pro active business attitude among entrepreneurs, instead of the wait and see-mentality and a government which will create the right business climate could help the island to get out of the present economic recession.