Political and economic outlook

• The ruling coalition led by the prime minister, Eugene Rhuggenaath of the Partido Antiá Restrukturá, faces significant challenges ahead of what is set to be a contentious election (due in April 2021).
• Even after the election takes place, The Economist Intelligence Unit expects the fractious political environment to hinder progress on fiscal consolidation and efforts to tackle corruption after the coronavirus (Covid-19) pandemic.
• 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.
• Real GDP will recover by 10.2% in 2021 owing to an investment support package from the Netherlands, after falling by an estimated 27.5% in 2020. Growth will moderate to 7.4% in 2022, but real GDP will not return to pre-pandemic levels within the forecast period.
• After sliding to an average of 2.2% in 2020, annual inflation will average 3% in the 2021-22 forecast period as oil prices and domestic demand recover. Monetary tightening will begin in the second half of 2021.
• Following its peak of an estimated 28.9% of GDP in 2020, the current-account deficit will narrow over the forecast period, averaging 19.2% of GDP in 2021-22, as export earnings from the tourism sector recover in line with a gradual abatement of the pandemic.

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Key changes since September 7th

• We have revised our real GDP forecast for 2021, to 10.2% (from 6.3% previously) in the light of a long-term investment and financial support package offered by the Netherlands under a recent agreement singed with the country.
• The latest tranche of fiscal support, worth Naf181, (US$100m) will help to ease some fiscal pressures in the near term, by providing the government with additional funds to carry out economic recovery programmes.

The quarter ahead

• TBC-GDP (Q2 2020): The Centrale Bank van Curaçao en Sint Maarten (the joint central bank) reported that real GDP fell by 6.9% year on year in the first quarter. We expect the negative trend to have intensified in the second quarter as the pandemic gained a global foothold and led to a total shutdown of tourism-the country's main source of income.