Update Country Report Curaçao 19 Jan 2016

Event

Although tourism sector revenue improved in the third quarter of 2015, the latest official data points to continued economic stagnation.

Analysis

According to data from the Curaçao Tourism Board (CTB), overnight stays by tourists fell by 5% year on year in the third quarter of 2015. However, at US$110.2m, tourism sector revenue was up by nearly 4% compared with the same period of 2014, driven by a 6% increase in receipts from large hotels. This was probably the result of higher room rates: the CTB reported a 4.2% year-on-year increase in the average daily rate (ADR) for hotel rooms in the third quarter, to US$141.6. Similarly, Revenue per Available Room (RevPAR) was up by more than 10%.

Other indicators monitored by the Centrale Bank van Curaçao en Sint Maarten (CBCS, the central bank) indicate that the economy remains stagnant. Container movements, water production, power generation, oil refining activity, man hours worked on ship repair and construction during 2015 have broadly been similar to-and often lower than-they were in 2014 and 2013. Furthermore, bank lending to the private sector contracted on a year-on-year basis in the first nine months of 2015. Annual inflation has consistently been lower than 2%, and has been declining since April.

In spite of the general softness of the economy, the College Financieel Toezicht (CFT, the independent agency that oversees the government's fiscal position) noted in mid-December that the official budget is "in order" and that the agency's previous recommendations had been taken into account.

Impact on the forecast

The CTB's latest data confirms The Economist Intelligence Unit's view that increased spending by tourists has boosted economic activity in Curaçao since the middle of 2015. Nonetheless, we maintain our forecast that real GDP will expand by an anaemic 0.5% in 2016, similar to the estimated 2015 rate of growth.