After real GDP grew by an estimated 4% in 2021 on the back of a recovery in tourism in the last quarter, we believe that economic growth will accelerate in 2022, to 6%. Growth in 2022 will be driven by a sharper rise in tourism inflows as vaccine coverage in major source markets increases, but Curaçao will not see a return to pre-pandemic tourism levels until at least 2023. Inflation in the US and the Netherlands-two large sources of tourists to Curaçao-will affect disposable incomes in those countries, and the war in Ukraine has weakened the euro against the US dollar, making it more expensive for Europeans to travel. A notable downside risk to the outlook for 2022 is the possible emergence of vaccine-resistant variants of covid-19; depending on the transmissibility and severity of infections caused, these variants could force the government to adopt fresh lockdown measures to stem the spread of the virus, which would constrain GDP growth. Another risk is the escalation of the Russia-Ukraine conflict, which could keep prices higher for longer, subduing tourism and investments.

Although we do not forecast components of real GDP, we expect recovery in 2022-23 to be driven by consumption (especially private consumption), which will be aided by a continuation of some fiscal support measures and sustained growth in tourist arrivals. On the investment front, we expect uncertainties stemming from global inflation and the pandemic to linger throughout the forecast period, causing businesses to delay investment projects further. Activity at the Isla oil refinery is expected to restart this year, with an operator due to be selected by the end of June. There are risks of delays, and the resumption of operations is likely to come only later in the year, supporting stronger growth in 2023. In view of this situation, Dutch liquidity support will be crucial in stimulating recovery in 2022-23.