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 main source of tourists to the country and an important trade partner.
• The incoming coalition government, led by Gilmar Pisas, will be responsible for steering the Curaçaoan economy recovery. The coalition's majority in parliament will help the smooth passage of the government's agenda items.
• The Kingdom Council of the Netherlands will continue to provide fiscal supervision, although disagreements with the incoming government over certain financing conditions will disrupt the flow of Dutch financing, aggravating fiscal pressures.
• Real GDP will recover by 6.5% in 2021 owing to an investment support package from the Netherlands, after contracting 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, lifts 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 objective, but will largely remain on hold in the short term, amid more immediate concerns such as economic recovery from the pandemic.
• Curaçao's rapid vaccination rate compared with the larger Caribbean islands will make it more attractive to tourists during the Northern Hemisphere summer season.

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Key changes since March 8th

• Fiscal pressures on the incoming government will rise, owing to the coalition's opposition to receiving oversight from the Caribbean body for Reform and Development-a condition for receiving the third tranche of Dutch financing.
• The Economist Intelligence Unit have revised our real GDP forecast for 2021 to 6.5% (from 5.5% previously), owing to an easing of restrictions with the drop in Covid-19 cases and a rapid vaccination drive.

The quarter ahead

• June-New government: The Movementu Futuro Kòrsou (MFK) and the Partido Nashonal di Pueblo (PNP) formed a coalition agreement in late April but are yet to form a government, as the cabinet selection and screening process is still ongoing. We now expect the new government to be sworn in in June.
• TBC-GDP (Q4 2020): The Centrale Bank van Curaçao en Sint Maarten (the joint central bank) reported that real GDP fell by 20.4% year on year in the third quarter. We expect the negative trend to have continued into the fourth quarter owing to a total shutdown of tourism, the country's main source of income, caused by the pandemic.