PHILIPSBURG--The St. Maarten economy "is still expanding." That is the verdict of the Department of Economic Policy and Research after its consideration of seven major economic indicators.
The department also says St. Maarten will experience significant growth, barring any hurricanes in 2001.
It stresses, however, that there is need for economic diversification "to jump start and stabilize the economy, create jobs and alleviate the liquidity challenges of government."
In a press release on the "Executive Summary of the Economic report 1999-2000," prepared by the department, which is headed by Miguel de Weever, it is noted that the general review of the economy did not take into account the various individual and/or sectorial developments because, unlike the Central Government, "the Island Government of St. Maarten does not have the legal authority to request this information."
It listed the seven major indicators used in assessing the performance of the economy as the turnover tax (ToT), cruise tourism, stay-over tourism, weighted tourist days, residential deposits, residential loans and government revenue.
All of these indicators, "with the exception of stay-over tourism and government revenues," have shown growth and "this points to the fact that the economy is still expanding," the department said.
It referred to the ToT as the most important indicator, "as it is a tax which is based on the turnover of business activity" and contended that "if the turnover tax increases (after factoring out inflation) this implies that consumption had to have increased."
It said indications from the Central Bureau of Statistics (CBS) have shown a flat or insignificant change of 0.5 per cent increase of inflation in 2000 and, taking into account the increase of ToT of 7.6 per cent in 2000 compared to 1999, "this shows that the economy is indeed expanding."
It said "the tremendous increase and volume of the cruise tourists market primarily drove the economy and subsequently, increased ToT," with the cruise tourism industry showing an astounding increase of 41 per cent in 2000, relative to 1999.
"Naturally part of this increase is a direct result of the drastic reduction of the industry in 1999 caused by Hurricane Lenny. Factoring out the decline of Lenny, St. Maarten still observed a double-digit increase of 10.8 per cent in cruise tourism."
There was "a slight decline of 2.8 per cent" in stay-over tourist arrivals, and this decrease also spilled over into the government revenue, where "a moderate slide of 4.8 per cent in government revenue" was observed. These decreases were recorded in particular in the tourist-related revenue for government of room, rental and timeshare taxes.
"These developments have also had a ripple effect on the overall economy which affect jobs and profits of the economy, subsequently, causing contractions in wage and profit tax in 2000, compared to 1999. A possible explanation of the decrease may also be the malignant problem of tax assessment and collection. However, considering that this has been a structural problem for some time now, this can only partially explain the decline of government revenue," the Department said.
It explained that one arrives at the "total weighted-tourist days" when one considers the economic impact of the cruise tourists and stay-over tourist, numerically and statistically. And, after factoring out the number of tourists going to the French side and taking into account the number of days each stay-over tourist remains on the Dutch side of the island, the calculations indicated an increase of 7.5 per cent in 2000, relative to 1999.
"Upon review, we realize that there is a relatively close approximation to the increase of ToT and the total weighted-tourist days, reflecting a relatively close correlation, when we take into account the relative impact of the various types of tourist markets," it explained.
In reviewing developments in the banking industry, the department said residential deposits had witnessed a moderate increase of 3.9 per cent in 2000, compared to 1999, but in the area of residential loans, there was "a whopping increase of 14.6 per cent" in 2000, compared to 1999.
The department pointed out, however, that due to the lack of detailed and updated data, there was the possibility that the figures may be concealing developments which may exist and this may lead to the realization that the projections of the economy may be off by a slight margin.
It pointed out that in this regard, an alternative scenario could be that there is the possibility that the economy could have remained flat or even contracted slightly because of the relative increase in ToT.
But it added: "When we observe marginal increases in key indicators, after a year of a hurricane, this could be regarded as a relative weak economy. When we consider that ToT is the most comprehensive reflection of the economy against the estimated ToT, after factoring out the assumed inflation, and the marginal increase, the real growth of the economy might be marginal or even may have contracted slightly. However, the Department of Economic Policy and Research believes the latter explanation to be the least plausible based on our analysis."
In concluding, the department said it had observed growth in the economy, in particular, considering major developments such as the Harbour having been completed; the airport having just completed its apron as part of its expansion plans, as well as Maho (Beach Hotel) having re-opened its doors in the latter part of the 2000 tourist season.
It added that, barring any hurricanes in 2001, "with our renewed expansion plans, projects, and capacity, St. Maarten will experience significant growth. In addition, a renewed call for economic diversification is imperative to jump start and stabilize the economy, create jobs and alleviate the liquidity challenges of government for additional and continued export (i.e. tourism) promotion towards economic growth and development."
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