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. The Netherlands is the main source of tourists to the country and an important trade partner.
• The new 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 new government over certain financing conditions will disrupt the flow of Dutch financing, aggravating fiscal pressures.
• The Economist Intelligence Unit expects that real GDP will grow by 6.5% in 2021, owing to an investment support package from the Netherlands, after contracting by an estimated 18.4% in 2020. Growth will rise to 11.5% in 2022, but real GDP will not return to pre-pandemic levels within the 2021-22 forecast period.
• The current-account deficit will narrow over the forecast period, driven by a resumption in tourism inflows. However, it will remain large, 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 Covid-19 pandemic.
• Curaçao's rapid vaccination rate compared with larger Caribbean islands will make it more attractive to tourists during the northern hemisphere summer season.

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Key changes since June 1st

• The Pisas government has reached a revised agreement with the Netherlands on the creation of a new fiscal oversight body, satisfying one of the conditions for obtaining additional Dutch financing. This will ease fiscal pressures in the near term.

The quarter ahead

• TBC-GDP (Q1 2021): The Centrale Bank van Curaçao en Sint Maarten (the joint central bank) reported that real GDP fell by 18.4% in 2020. In the first quarter of 2021 we expect real GDP to have contracted in year-on-year terms, mainly owing to base effects (the pandemic did not have a significant impact on output in the first quarter of 2020).