Outlook for 2017-18

• After elections on April 28th, Curaçao is now governed by a coalition led by the Partido Antiá Restrukturá and a new prime minister, Eugene Rhuggenaath, whose mandate is slightly stronger than that of his predecessor.
• Progress on fiscal consolidation and tackling corruption will be gradual and subject to opposition pressure. Tougher counter-narcotics action in Central America poses a risk to security in the form of diverted drug flows.
• The Kingdom Council of the Netherlands will continue to provide fiscal supervision to Curaçao and help it to maintain a balanced budget. A public debt/GDP ratio of over 40% adds an element of fiscal risk.
• GDP is estimated to have declined by 1% in 2016 owing to reduced tourism revenue. We forecast modest growth averaging 0.3% in 2017-18, hindered by public spending cuts and weak consumer demand.
• A fragile economic recovery and deflationary pressures emanating from low oil prices will keep inflation at bay in 2017-18, when it will average just below 2%.
• The current-account deficit will narrow slightly as a share of GDP, but will remain large. Recovering tourism demand will push up services receipts, while the trade deficit will narrow.

Review

• In late August, the former Netherlands Antilles signed a Political Dialogue Act with the Dominican Republic, setting out the framework for greater economic co-operation among the Caribbean nations.
• Real GDP declined by 1% in the fourth quarter of 2016, resulting in an annual contraction of 1% following flat growth in the previous three quarters.
• The Centrale Bank van Curaçao en Sint Maarten (the Curaçao and Sint Maarten joint central bank) capped lending rates at a maximum of 27% to combat excessive rates in the micro-lending sector.
• Inflation has picked up in recent months, and stood at 1.1% in July, owing to higher food and gasoline prices.
• Tourist arrivals declined by 17% year on year in the fourth quarter of 2016, driven by a steep decline in visitors from Venezuela. The trend has continued in 2017: stopover arrivals declined by 12% year on year in July.