Political and economic outlook

• The administration of the prime minister, Eugene Rhuggenaath of the Partido Antiá Restrukturá, will face a challenging time governing, given its slim majority of just one seat in the legislature, although instability is not likely in the short term.
• 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 Curaçao.
• 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 that GDP contracted by 1.5% in 2017, owing to a slowdown in growth of tourism revenue and domestic demand. Public spending cuts and weak demand will keep growth below 1% annually in 2018-19.
• Inflation will be slightly higher in 2018-19 than in recent years, owing to a pick-up in 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 November 22nd

• The Economist Intelligence Unit has revised its real GDP growth estimate for 2017 downwards, from a contraction of 0.3% to a decline of 1.5%, on the back of weaker than anticipated public and private consumption, and shrinkage in manufacturing output.
• We have also adjusted our forecast for 2018 real GDP growth downwards, from 0.7% to 0.3%, owing to lingering effects of the slowdown in 2017 and a rise in inflation, to 2%.
• We have revised our fiscal balance estimate for 2017 from a balanced budget to a deficit of around 3% of estimated GDP, owing to slippage in both non-tax revenue and tax earnings.
• The current-account deficit is likely to have been smaller in 2017 than previously thought, as import demand declined faster than the decrease in exports. We have adjusted our estimate for the deficit accordingly.
• The risk of the island's Isla oil refinery becoming inoperable has increased, after the collapse, in December, of a deal to handover its operations to a Chinese firm in 2019. This adds a new element of risk to our GDP forecasts for 2018-19.

The quarter ahead

• April (date TBC)-Annual pension fund report release: The release of the annual performance report for the country's pension fund will illuminate the trajectory of the government's rising indebtedness to the public pension fund.
• TBC-Fourth-quarter bulletin: We expect the full-year report to show a budget deficit of around 1% of GDP and a real GDP contraction of around 1.5%.