Political and economic outlook

• After elections in April, 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 through Curaço.
• The Kingdom Council of the Netherlands will continue to provide fiscal super-vision to Curaçao and help it to maintain a balanced budget. A public debt/GDP ratio of over 40% will continue to add an element of fiscal risk.
• The Economist Intelligence Unit estimates GDP to decline by 0.3% in 2017, owing to reduced tourism revenue. We forecast modest growth averaging 0.7% of GDP in 2018-19; higher growth will be hindered by public spending cuts and weak consumer demand.
• Inflation will be slightly higher in 2018-19 than in recent years, owing to a pick-up in low oil prices. Inflation will average just above 2% in 2018-19.
• The current-account deficit will narrow slightly as a share of GDP, but will remain large. Recovering tourism earnings will boost services receipts, while the trade deficit will narrow.

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Key changes since September 19th

• We have revised our real GDP growth estimate for 2017, to a contraction of 0.3% of GDP down from growth of 0.2% of GDP, based on latest data that show a contraction of 0.9% of GDP in the first quarter due to a rise in imports, which offset export growth.
• We are more sanguine on fiscal consolidation following improvements in both tax and non-tax revenue collection over the first quarter of 2017.
• We expect the current account to narrow more rapidly in 2018-19 than previously thought, owing to a rise in global oil prices, which will help to narrow the trade deficit, and auspicious prospects for tourism, which will help to grow the primary income surplus.

The quarter ahead

• January 2018 - Tourism performance report, third quarter 2017: We expect the report to show a continued decline in stayover arrivals, from 10% year on year in the January-June period to 12% year on year in the January-September period. However, we also expect a rise in cruise arrivals, which over time will temper the decline in overall visitors.
• TBC first quarter 2018 - Quarterly bulletin, second quarter of 2017: In the second-quarter bulletin, compiled by the Centrale Bank van Curaçao en Sint Maarten (the central bank), we expect to see the decline in the import bill to stabilise as oil prices rise, while export earnings will pick up on the back of a slow recovery in tourism.
• TBC - Dutch authorities to visit: During the first quarter of 2018 we expect the Dutch authorities to visit Curaçao and Sint Maarten to review the reconstruction progress. We expect concrete announcements regarding grants and investment, as well as a review of Curaçao's fiscal consolidation efforts.