Under the tutelage of the Kingdom Council of the Netherlands, the government will intensify its fiscal consolidation efforts, as fiscal deficits continue to grow. At the end of the third quarter of 2017 the government posted a cumulative budget deficit of more than Naf 100m (US$56m), or around 1% of GDP. This was the result of large increases in expenditures, primarily contributions to the social security bank, SVB. However, this result does not include further commitments of around Naf 50m that the government incurred towards the end of the quarter, which we estimate will have yielded a full-year deficit of around 2% of GDP. However, under a mechanism of financial support from the Dutch government, Curaçao received more than Naf$50m in 2017; once this is accounted for, we expect that the final fiscal deficit will have been reduced to a final level of 1% of GDP for the year. With the economy recovering in 2018, a rise in tax revenue will bring the fiscal balance back to a small surplus.

A financial supervision arrangement with the Dutch government will maintain pressure for fiscal reform, but in the meantime expenditure is being held down (a spending freeze has been in place since 2012). Low economic growth in 2018-19 will discourage tax increases. However, aid from the Dutch government following the destructive hurricane season of 2017 will help to prevent further fiscal deterioration. Although the financial arrangement with the Netherlands is useful in reining in the deficit, the CBCS has criticised it for being too inflexible. Pressure to keep the island's numerous social funds well capitalised and continue upgrading infrastructure will remain a constant challenge. The public debt/GDP ratio has continued to rise, reaching an estimated level of around 50% of GDP by end-2017, owing to a rise in domestic debt. However, the return to a fiscal surplus in 2018 should prevent a significant rise in the debt stock.