Political and economic outlook

• The administration of the prime minister, Eugene Rhuggenaath of the Partido Antiá Restruktur, 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 supervision to Curaçao and help it to maintain a balanced budget. A public debt/GDP ratio of around 50% will continue to add an element of fiscal risk.
• After a contraction in GDP in 2017 and 2018, we forecast a gradual expansion in 2019-20 (averaging 0.3% per year), driven by rising tourism. Weak manufacturing and ongoing fiscal constraint will prevent stronger growth.
• Inflation will remain slightly higher in 2019-20 than in recent years, owing to a pick-up in oil prices (in 2019) and food prices (in 2020). Inflation will average 2.5% during the forecast period.
• The current-account deficit will narrow gradually as a share of GDP, but will remain large, at over 13% of GDP in 2020. Recovering tourism earnings will boost the services surplus, while the trade deficit will narrow.

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Key changes since September 5th

• The Economist Intelligence Unit has revised its real GDP estimate for 2018 downward from a contraction of 0.6% to one of 2%, reflecting an only small increase in tourism activity so far this year, offset by still-weak consumption.
• We have also downgraded prospects for the extent of a recovery in 2019. We previously expected GDP growth of 1%, but now are forecasting much weaker growth (0.4%). With little real momentum, growth of 1% is out of reach.

The quarter ahead

• TBC- New Isla refinery operator: The government has been hoping to announce a new strategic partner who will take over lease and operation of the island's Isla oil refinery, currently leased by PDVSA, Venezuela's state oil firm. This will be a crucial step in ensuring that production increases closer to capacity.