We forecast real GDP growth of 6% in 2022, driven by a sharp rise in tourism inflows as vaccine coverage in major source markets increases, but tourism levels will not return to pre-pandemic levels during the forecast period. In 2023 real GDP growth will decelerate to 4.5% as an economic slowdown and high inflation rates in the US and the Netherlands-two significant sources of tourists to Curaçao-will affect disposable incomes in those countries. A downside risk to the outlook for 2022-23 is the possible emergence of new, vaccine-resistant variants of covid-19; depending on the transmissibility and severity of infections, the government could be forced to adopt fresh lockdown measures to stem the spread of the virus, which would constrain GDP growth. Another risk is the escalation of the war in Ukraine, 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. Investment will also help to buoy growth, despite uncertainty stemming from global inflation and the covid-19 pandemic. Activity at the Isla oil refinery is expected to restart in the fourth quarter, under the operation of a consortium of seven US and Brazilian companies, but there are risks of delays, as the contract, which was expected to be signed by early September, has not yet been announced.