Central Bank: “Economic outlook for 2017”
WILLEMSTAD - Following an expansion of 3.1% in 2016, the world economy is projected to grow by 3.4% in 2017. 3 Growth in 2017 will be driven primarily by the emerging and developing economies as economic activity in countries such as Russia, Brazil and Nigeria will increase again, following a contraction in 2016. In the advanced economies, growth will accelerate slightly, supported mainly by a strengthening of the recovery in the United States and Canada and a rebound in Japan. By contrast, growth will slowdown in the euro area, reflecting largely the uncertainties surrounding the effects of the Brexit. While the economic recovery of the United States –the main trading partner of Curaçao– will strengthen, output growth in the Netherlands –the second trading partner of Curaçao– is expected to remain stable. Similar to the previous three years, Venezuela –Curaçao’s third trading partner– will remain in a recession.
Against this background, the economy of Curaçao is projected to grow by 0.4% in 2017, ascribable to an increase in domestic demand mitigated by a decline in net foreign demand. Growth in domestic demand will be supported by both private and public demand. The rise in private demand will result from an increase of investments in, among other things, the second megapier, the construction and renovation of hotels, the upgrading of the airport, and the Wechi housing project. In addition, private consumption is expected to increase modestly. Public demand growth will be driven also by an increase in both consumption and investments. However, public investment growth will be less pronounced than in 2016 as the construction of the new hospital will reach its final stages.
By contrast, net foreign demand will contribute negatively to real output growth as the increase in imports will surpass the higher exports. Imports will rise due to among other things, an increase in oil imports driven by the higher projected international oil prices. Furthermore, nonoil merchandise imports will increase as a result of, among other things, more imports of construction materials because of the projected investments for 2017. Also, imports by the wholesale and retail trade sector will go up on the account of a higher domestic demand and more tourism expenditures. The import of construction services will also increase because of the planned investment activities. The higher exports will reflect an increase in foreign exchange revenues from bunkering activities as a result of the higher projected international oil prices. Foreign exchange earnings from tourism activities will also go up, in line with the projected economic growth in the main tourism markets of Curacao.
Meanwhile, the inflation rate is projected to turn positive to 0.2% in 2017, primarily because of a projected increase in international oil prices.