Political and economic outlook

• The ruling coalition led by the prime minister, Eugene Rhuggenaath of the Partido Antiá Restrukturá, faces a challenging political landscape; it has a slim legislative majority and is likely to increasingly face pushback from opposition parties ahead of April 2021 elections.
• The Economist Intelligence Unit expects the fractious political environment to hinder progress on fiscal consolidation and efforts to tackle corruption, indicating progress on these fronts will be disjointed and incremental.
• The Kingdom Council of the Netherlands will continue to provide fiscal supervision to Curaçao and help the government to rein in fiscal imbalances. Despite Dutch support, a high public debt/GDP ratio (of over 50%) will continue to add an element of fiscal risk.
• The persistence of weak private domestic consumption, restricted public spending and enduring manufacturing woes will result in a modest contraction in 2020, prolonging a recession that began in 2016, before the economy recovers slightly in 2021.
• Annual inflation-fuelled by the introduction of a new general consumption tax in April-will edge higher to 3.7% in 2020, despite softer oil prices. Inflation will moderate slightly in 2021, but will remain high as oil prices recover.
• The current-account deficit will narrow, but will remain large at more than 20% of GDP in 2020-21. Recovering tourism earnings will boost the services surplus, while the trade deficit as a share of GDP will narrow slightly, as demand for construction materials falls.

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Key changes since December 6th

• Assuming that the coronavirus (Covid-19) outbreak undermines growth in the tourism sector (which we expected to be a key driver of growth in 2020), we have revised down our 2020 GDP forecast to a contraction of 0.6% (from a contraction of 0.3% previously).

The quarter ahead

• TBC-New Isla refinery operator: Switzerland-based Klesch Group has reached an agreement to take over operations at the 335,000-barrel/day oil refinery, but the deal has yet to be finalised. Klesch has indicated that it could manage operations by April, but talks with previous bidders have hit hitches, suggesting that negotiations could be prolonged.
• TBC-Real GDP data (2019): We expect the release of official data related to year-end 2019 performance to be slow and delayed. However, taking into account official estimates released by the government, our sombre assessment of the economy is likely to be confirmed by the official data; we retain our GDP growth forecast of a 2% contraction.