Political and economic outlook

• Curaçao is a tiny, open island economy and a constituent country of the Kingdom of the Netherlands that is heavily dependent on tourism, with the Netherlands being the key source of tourists to the country and an important trade partner.
• The Economist Intelligence Unit expects the Partido Antiá Restrukturá (PAR)-which leads the ruling coalition-to suffer defeat at the March 19th general election, owing to public discontent with the government's handling of the coronavirus (Covid-19) pandemic.
• The fractious political environment will hinder progress on fiscal consolidation and efforts to tackle corruption after the coronavirus pandemic. The Kingdom Council of the Netherlands will continue to provide fiscal supervision.
• Real GDP will recover by 5.5% in 2021 owing to an investment support package from the Netherlands, after falling by an estimated 21% in 2020. Growth will rise to 11.5% in 2022, but real GDP will not return to pre-pandemic levels within the forecast period.
• The current-account deficit will narrow over the 2021-22 forecast period, driven by a resumption in tourist inflows. It will remain large nonetheless as domestic demand recovery, coupled with rising oil prices, will raise the import bill.
• Reform of the currency union and the splitting of Curaçao and Sint Maarten's shared central bank will be a long-term agenda, but will largely remain on hold in the short term, amid more immediate concerns such as economic recovery from the pandemic.

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Key changes since December 9th

• In view of the positive developments in the rollout of Covid-19 vaccines , we now believe Curaçao to reach herd immunity by late 2021, which will help to boost GDP growth in the latter half of the forecast period above what we previously expected.

The quarter ahead

• March 19th-General election: We expect the opposition Movementu Futuro Kòrsou (MFK) to steal some seats from the PAR, eroding the latter's largest single party status in the legislature. The MFK is the best-positioned party to win the general election but it will have to enter into a coalition agreement in order to form government.
• TBC-GDP (Q3 2020): The Centrale Bank van Curaçao en Sint Maarten (the joint central bank) reported that real GDP fell by 30.3% year on year in the second quarter. We expect the negative trend to have continued into the third quarter owing to a total shutdown of tourism-the country's main source of income-caused by the pandemic.