Update Country Report Curaçao 01 Nov 2016

Event

GDP declined in both Curaçao and Sint Maarten during the second quarter. Output was down by 0.2% year on year in the former and by 0.3% in the latter.

Analysis

The contraction in Curaçao stemmed entirely from a fall in net trade, as exports of goods and services declined at a faster pace than imports (with decreases of 1.7% and 1.5% year on year respectively). In contrast, domestic demand remained stagnant, with gains in the public sector (including investment and consumption) of 0.3% offsetting an equivalent decline in the private sector.

From a sectoral perspective in Curaçao, agriculture and construction were the best performers, each growing by 3.1%. Utilities were up by a more modest 1%, owing to increased water and power demand. The biggest decline, of 5%, came from restaurants and hotels, owing to falls in stay-over visitors and the number of visitor nights. This was followed by declines in manufacturing (by 3%), owing to lower output from the Isla oil refinery and in ship repair; and in transport and storage (by 1.6%), reflecting lower airport and harbour activity. Retail and wholesale trade also posted a modest decline, as did real estate.

In contrast to Curaçao, the contraction in Sint Maarten stemmed entirely from a fall in domestic demand. The public sector was the biggest contributor, falling by 1.6% (in both consumption and investment). This could not be offset by a 1.1% rise from the private sector, even though private investment was up by 2.5%. Net trade was a positive contributor, as the decline in exports (0.55) was slightly less than in imports (0.6%).

From a sectoral perspective, restaurants and hotels fell the most, by 2.4%, owing to a fall in cruise-ship visits, followed by wholesale and retail trade (down by 1.5%); transport, real estate and social services also were down slightly. The best performer was manufacturing, up by 4%, owing to increased yacht repairs, followed by utilities (up by 1.4%, driven by more yachts in port drawing water and power) and household services (up by 1.2%).

Impact on the forecast

The quarterly figures will result in a modest downgrade to our 2016 growth estimates of 0.2% for Curaçao and 0.7% for Sint Maarten. However, it is still premature to assume that the islands' recoveries have been derailed, given that quarterly GDP has tended to be volatile. Our forecasts of 0.4% and 0.9% GDP growth respectively in 2017 are hence unchanged.