Political and economic outlook

• The coalition government led by the prime minister, Eugene Rhuggenaath of the Partido Antiá Restruktur, will face challenges governing, with a slim majority in the legislature and a prolonged crisis in Venezuela that threatens to engender political instability.
• 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 high level of public debt to GDP of around 50% will continue to add an element of fiscal risk.
• After a contraction in GDP in 2017 and 2018, The Economist Intelligence Unit forecasts 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 as demand for construction material falls.

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Key changes since December 8th

• According to the national statistics institute, higher oil import costs pushed inflation up in the third quarter of 2018. We have revised our estimate for average annual inflation in 2018 upwards to 2.6%.

The quarter ahead

• TBC-New Isla refinery operator: The top bidder for the island's Isla oil refinery withdrew in February. The government has revived the bidding process to select a new strategic partner to take over the lease and operation of the refinery that is currently leased by PDVSA, Venezuela's state oil firm. A new operator will support revenue growth.
• TBC-Caricom discussions for associate membership: The Caribbean Community (Caricom) will initiate the process of negotiations for Curaçao's associate membership.