The economy of Curaçao will recover partly in 2021, at the rate of 5.5% growth, after plummeting by an estimated 21% in 2020. Economic recovery in 2021 will break the chain of multiyear recessions that the island has been subject to since 2016, and will be the result of base effects and some resumption in tourism and related sectors. Once tourism activities normalises (which is expected in 2022), GDP growth will accelerate substantially to 11.5%.

Tourism came to a standstill during the health crisis and will be slow to recover, dragging output down as sentiment towards travel and tourism will remain pessimistic until a vaccine is rolled out globally. The worst of the pandemic was felt in the second quarter of 2020 when mobility restrictions and cross-border controls were the most stringent, thereby completely shuttering tourism. In fact, the CBCS reported that in the second quarter of 2020, real GDP fell by an unprecedented 30.3% year on year. On the demand side, all components fell but the most pronounced decline was registered in private consumption, on the back of a pandemic-induced lockdown and stress in the labour market caused by a shutdown in activity across sectors and compression of external demand. Public consumption fell owing to lower disbursements on goods and services. Border controls affected trade flows, with a decline in global demand causing exports to fall at a faster pace than imports. Although we expect some sequential gains in economic activity as tourism was gradually reopened, all demand-side components are likely to have remained significantly depressed in subsequent quarters.

The pandemic is estimated to have battered Curaçao's already poor manufacturing sector performance, which contracted by 17.1% (in nominal terms) in 2019, reflecting the Isla oil refinery's ongoing woes. Some positive news came in January this year when the government announced a new preferred bidder, the Curaçao Oil Refinery Complex (a privately held company) to take over the operating lease of the refinery, after negotiations with Klesch Group (based in Switzerland) failed to come through. If an agreement is reached, refinery revenue could resume towards the end of 2021, lifting economic growth in 2021-22.