WILLEMSTAD - Elections is scheduled for March 19 this year and according to the Electoral Council, 24 parties have signed up to battle for the 21 seats in parliament. But according to the Central Bank of Curaçao and St. Maarten (CBCS), the political uncertainties resulting from these elections pose a risk to the projection of economic growth.
The CBCS expects real growth of 4.8 percent for the economy of Curaçao by 2021. This, in its own words, "conservative projection" takes into account various uncertainties, including the aforementioned elections in two and a half months, but otherwise mainly related to the further development of the Covid-19 pandemic and the future of the refinery.
This projection assumes that the refinery around the Schottegat "will not resume operations in 2021". "If a new strategic partner for the refinery is found, allowing refinery operations to resume in 2021, it will result in an upward overhaul of the projection," the CBCS explains. The year 2020 ended with reports about a new 'preferred bidder' for the petroleum installations in Curaçao.
“However, the extent to which the projection is adjusted will depend on several factors related to the new operator, including how fast the acquisition is progressing, the size of the investments, the restart of operations and the number of jobs that will be generated.” According to the CBCS.
The forecast economic growth of 4.8 percent in this new year is, according to the outlook of the Central Bank, driven by an increase in net foreign demand, moderated by a decline in domestic demand. "Despite the recovery, gross domestic product (GDP) levels will remain well below pre-Covid levels."
Inflation will rise to 3.7 percent in 2021, mainly due to the introduction of the general spending tax (abb), which will replace the current sales tax (ob). The CBCS projection for 2021 is already somewhat outdated, as it is based on the assumption that the government will introduce the ABB on January 1, 2021; the latter is not the case and the aim is now to introduce it in the first quarter. Imported goods will be subject to an ABB rate of 12.5 percent, while locally produced goods and services will be subject to a rate of 9 percent.
Furthermore, the CBCS assumes that Curaçao tourism will recover in 2021 but will remain below the pre-pandemic level. "The recently issued code orange travel advice for Curaçao by the Dutch government will have a negative effect on tourism income in the first quarter of 2021."
The Central Bank projection further assumes that the employment contracts between CRU (Curaçao Refinery Utilities, subsidiary of government nv Refineria di Kòrsou, RdK) and the former employees of the Isla refinery (Refineria Isla Curaçao / PdVSA) will be renewed in 2021. Now there are still 550 employees.