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.
• Progress on fiscal consolidation and tackling corruption will be gradual and subject to opposition. Tougher counter-narcotics action in Central America poses a risk to security as a result of diverted illegal 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 around 2.4% 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 March 22nd

• We have revised our GDP growth forecast for 2018, from 0.3% to 0.2%, owing to uncert-ainty over the future of the Isla oil refinery on the island. A court ruling has permitted its seizure by ConocoPhillips (US) from the Venezuelan state oil firm, PDVSA.

The quarter ahead

• TBC - Isla refinery dispute resolution: We expect the government's successful negotiations with ConocoPhillips, to secure the salvation of the Isla refinery. Production will, however, suffer during the quarter.
• TBC - Tourism receipts continue to grow: Early signs suggest that 2018 will see a recovery in tourism receipts, despite stagnant arrivals numbers, owing to the partnerships with European and Middle Eastern airlines that bring higher-paying tourists.