Country Report Curaçao 1st Quarter 2016
Summary
Outlook for 2016-17
- The government of the prime minister, Bernard Whiteman, will serve out its term, but no significant policy initiatives are expected to advance before the October 2016 election, and political stability will remain fragile.
- Progress on fiscal consolidation and tackling corruption will be hampered by the government's slim majority. Tougher counter-narcotics action in Central America poses a risk to Curaçao's security from 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 high public debt/GDP ratio of over 40% adds an element of fiscal risk.
- After years of recession, the economy will post positive growth in 2016-17, but the expansion will be weak at just 0.5% on average, hindered by retrenchment in public spending and weak consumer demand.
- A fragile economic recovery and deflationary pressures emanating from lower average oil prices will keep inflation at bay in 2016-17, with forecast average annual inflation of 2%.
- The current-account deficit will continue to narrow. Recovering tourism demand abroad will push up services receipts, while the merchandise trade deficit will narrow owing to cheaper oil imports.
Review
- Curaçao's next parliamentary election-only the second since the 2010 dissolution of the Netherlands Antilles-is likely take place in October, the latest possible point at which it can be held.
- Real GDP expanded by 0.3% in the third quarter of 2015, resulting in an average of 0.2% for the first three quarters. Growth was led primarily by restaurants and hotels, as well as utilities.
- The economy continued to experience deflation, with consumer prices declining by 1.1% year on year in October. In the January-October period, consumer prices fell by 0.3%.
- Total stopover tourist visitors increased by 3.8% year on year during January-October of 2015. However, those from the key Venezuelan market declined by 4.9% on account of a deepening recession in that country.
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