Curaçao's economy will recover partly in 2021, growing by 6.5%, 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 crossborder controls were the most stringent, thereby completely shuttering tourism. The economic recovery has been modest; the CBCS reported that in the third quarter of 2020 real GDP fell by 20.4% year on year-a smaller drop than the 30.3% contraction observed in the second quarter. On the demand side, all components fell, but the most pronounced decline was 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 that a new preferred bidder, the Curaçao Oil Refinery Complex (a privately held company), would take over the operating lease of the refinery, after negotiations with Klesch Group (based in Switzerland) failed. If an agreement is reached, refinery revenue could resume towards the end of 2021, lifting economic growth in 2021-22.