IC presentation

Economic Situation


The tentacles of the global financial crisis have left no economy untouched. Small island nations such as Sint Maarten are especially vulnerable since we are a mono-industry heavily dependent on the global economy. According to the Central Bank of the Netherlands Antilles, in the June quarter of 2007, the Antillean economy experienced a declining momentum of 2.0% during the same quarter of 2008. The overall slower pace of economic activity was related largely to the erosion of purchasing power, caused primarily by the higher prices for gasoline and food. As such domestic demand expanded at a reduced pace compared to 2007.

Locally private consumption was also curtailed due to the inflation-induced loss of purchasing power, due to high oil prices. Though the majority of the standard economic indicators for St. Maarten have expanded during the final quarter of 2008, in most cases it was at a slower rate than in 2007. There have also been some key contractions within critical areas such as tourism; the contractions are most likely the effects of poor consumer confidence in our key market and persons being more prudent in their spending habits.


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Turn-Over-Tax (TOT):

Adjusted turnover tax receipts collected up to December 2008 showed a 6.79% growth over the same period in 2007. The growth seen in 2008 may be attributed to an increase in sales volumes for food items and other (necessity) consumer goods, especially from French side shoppers as it became more attractive for them to purchase on Dutch St. Maarten with the decline of the U.S. dollar against the euro. Furthermore, the increase may also be attributed to higher prices, which translated into more ToT rather than more sales.


The CBS reported in December 2008 that prices were 3.9 percent less than in October; however the annual inflation rate in 2008 at 4.6 percent compared to 2007. Over the period of twelve months ending with December 2008, average consumer prices have increased by 4.6 percent compared to the same period one year earlier. The decrease is mainly due to lower tariffs for electricity and fuel. Housing costs decreased by as much as 8.5 percent as the tariff for electricity fell by 43 percent and the price for cooking gas by 39 percent. Transport and communication became 3.3 percent cheaper due to the price fall of gasoline and gasoil by 31 and 27 percent respectively. Prices also fell for the categories miscellaneous (-0.5%), recreation and education (-0.3%) and clothing and footwear (-0.1%).

Banking Sector:

The banking sector also has seen some spin off effects of the global economic crisis as persons are more cautious in how and on what they spend their money. However, direct effects are very limited due to the more prudent lending practices of our Commercial banks which have kept them isolated from the Banking Crisis in Europe and the United States.

Experts in the banking industry have seen an increase in the number of persons who do not qualify for loans due to being overextending (i.e too much expenses). Banks are not reporting any significant increases in foreclosures and delinquencies. In many cases most banks will work with consumers as it relates to restructuring, refinancing and counseling on a case by case basis. At this point the problem is not chronic; therefore it is not the norm. The President of the Central Bank also supports this view, as was illustrated in his presentation of February 5th 2009, that the banking sector is stable. There are some reductions in construction projects mainly due to the fact that many loan faculties are dependent on pre-sales, therefore as presales shrink so does the opportunity to borrow. However, higher end sales (over $1 million) are seeing less of a reduction as sales under $1 million. Banks are still reporting that investment opportunities are still present and available. Overall the outlook from the banking sector is cautiously optimistic.

The overall outlook for 2009 remains uncertain. Consumers and investors are being much more selective and prudent on how much and on what there are spending. As such the outlook is very heavily dependent on consumer confidence. Furthermore, there must be a strategic shift in our attitudes, perceptions and behavioral choices.


According to the Federal Labour Department for Sint Maarten in 2008 there was a 19 percentage increase in the total amount of dismissals compared to 2007. In 2008 a total of 61 companies requested permission to terminate employees due to economic and other reasons. In 2009 a total of 11 companies in Sint Maarten thus far have requested permission to terminate employees due primarily to economic reasons. In all 56 employees will be affected thus far for 2009. Sources from the Federal Labour department are also reporting that companies are also taking other measures including reduction in hours. This is significant considering we are still in the high season. However, the local Labour Department continued to show positive results up to October 2008, figures are still pending for November to January 2009. However, the number of registered jobseekers decreased by a total of 93 persons, compared to same period of 2007 (up to October), the inconsistencies between the Federal and Local Labour Department may be attributed to the fact that persons are not registering. Furthermore, there are private agencies that assist persons in finding employment.


Stay-over: The number of stay-over tourists arriving up to October 2008 grew by 3.9% compared to the same period in 2007. The North American market which is our primary market expanded by approximately 5% during this period. Growth was also recorded in the other source markets (European & Latin America) with the exception of the Caribbean (-9%) and Rest of the World (-1%) categories. The overall growth in numbers seen in the stay-over segment could be explained by the fact that tourists, who already had pre-bookings to St. Maarten, still visited the island.

According to data from the SHTA, combined occupancy rates (timeshare & traditional hotel bookings) continue to show declines for the months of November, December 2008 compared to the same period in 2007. Furthermore, the month of January 2009 also showed a decline in occupancy rates compared to the same period last year.

December 2008 occupancy rates were 66.3% compared to 72.7% in December of 2007 down by 6.4% (source SHTA).

January 2009 occupancy rates were 75.4% compared to 81.3% in January of 2007 down by 5.90% (source SHTA).

When looking at occupancy levels on a monthly basis in 2008 relative to 2007, a decline could be seen for five consecutive months from September 2008 to January 2009.


Cruise: The cruise sector saw a drop in both passenger arrivals and cruise calls in 2008 compared to 2007. Cruise passenger arrivals fell by 5% in 2008, while a total of 101 fewer cruise calls were made to the destination. The number of cruise calls was down by 91, due to less demand in the (Western) Caribbean & Mexican regions. This was according to a considerable drop in online registrations.

In light of the aforementioned the Island Government has implemented several measures to mitigate the impact of the global financial situation on the island.

Government Actions:

1. As world oil prices skyrocketed, government kept local prices stable. Thereby preventing volatile changes in consumer purchasing power due to having less money to spend from erratic changes from day to day of the amount of money a person has to spend.

2. In an effort to reduce the informal economy the Sector Economy and Tourism has hired a total of 6 controllers, 4 inspectors at the department of Control and Inspections and VOSEC has hired 2 economic controllers. Additionally, over 40 controllers across sectors have been trained as Extra Ordinary Police. Additionally, the Sector Economy and Tourism is in the process of developing and finalizing a special unit, called the Multi-disciplinary Control Unit. This unit, will consist of cross-sectoral controllers and inspectors, that will be cross trained in order to conduct controls in a much more effective and efficient manner.

a. With the additional controllers government has stepped up the consistency on controls,

b. The outcomes of these controls are monthly publications in both local newspapers of the prices of selective non-controlled products. The purpose is to better inform the public on the availability and price of items and to stimulate competitive pricing,

c. A review of the prices beginning from the publication of the price list shows some price decreases. For instance on average, the price of fruits and vegetables have decreased by 7.9% when comparing the prices controlled during the month of November to those controlled in the month of January 2009. Also comparing the prices of the month of January to February 2009, prices saw an increase of 3.2%. Of the fruits and vegetables on controlled when comparing November 2008 to January 2009, tomatoes, cabbage, and Tanya seed contributed had decreases, noting percentages of 28.8, 23.5 and 16.4 respectively while onions and sweet potatoes also noted a minor decrease of 5% and 7.4% respectively.

Concerning meats that include oxtail, stew beef, goat meat, mini spare ribs, pork chop and ground beef, in general, meats saw a slight decrease of 1.2% when comparing November 2008 to January 2009 while an increase of 4.4% could be noted when comparing these same months. Of the meats that were controlled during January 2009, the price of oxtail saw the biggest increase of 46.3% when compared the price in November 2008. Goat meat, mini spare ribs, stew beef and ground beef all saw decreases of 11.9%, 1.3%, 20.4% and 9.4% respectively when comparing these two months. When comparing the meats in the months of February 2009 to January 2009, oxtail and goat meat were the only two meats to experience a decrease of 9.3% and 1.1% respectively. During these months, stew beef saw the biggest increase noting an increase of 18.6%.

3. The Island Government recently approved a Naf6 million tourism stimulus package geared toward emergency marketing. The objective is to sustain bookings and keep Sint Maarten in the consumer’s mind and prevent erosion in overall bookings.

4. The island government is currently working diligently with the private sector to develop a comprehensive plan to mitigate the effects of the economic situation:

a. First meeting was held November 27th 2008 with Chamber and government.

b. Government and the Private sector held a pre-economic summit on December 15th 2008, as an outcome,

i. A Memorandum of Understanding (MOU) was developed. The MOU outlined government’s commitment and possible actions, the MOU has been approved by the Executive Council

ii. An Economic Summit is scheduled for March 5th 2009 with a kickoff presentation by the President of the Central Bank Mr. Tromp scheduled for March 4th at the Philipsburg Community and Cultural Center.

5. In order to facilitate the establishment of businesses, government is looking at the possibility of eliminating the Director’s license and the associated fee. Government is also looking at the possibility of not introducing new fees (i.e NV fee remains Naf-1550 rather than the proposed Naf-2500) and has improved the issuance of business licenses by automating the system and mandating. Additionally, government is in the process of reviewing the opening hours policy, whereby businesses will be allowed to open later on Thursday evenings if they so wish.



6. Government is in the processing of approving the new Vending Policy, which will increase vending opportunities. Most notably government will be lifting the Moratorium throughout the island.


Government has limited options in its arsenal primarily due to the type of economy and our constitutional structure (i.e. not independent, cannot borrow etc). However, despite these reflections government is working diligently to ensure all avenues are explored and exploited. The goal is to keep the economic wheels turning, as mentioned earlier our banking sector is stable, oil prices have decreased and are currently stable. The US$97.8 million Harbour expansion project is expected to induce economic activity, as the island prepares to accommodate the new Genesis class cruise ships which will have the largest passenger capacity in the industry. Plans to construct a second tender jetty in the lower Philipsburg area (near Sea Palace) to better facilitate the increase in expected cruise passengers is still on track. Several Social Economic Initiative (SEI) projects are also on track to be executed in throughout 2009. In light of the aforementioned the economic prognosis is very guarded and heavily dependent on what happens in the global economy.