Upon review of the major economic indicators of St. Maarten, the economic developments of the island have shown some signs of concern. In 2001, compared to 2000, the main economic indicators related to tourism such as Stay-over and Cruise tourism have shown contractions. This gives reason for concern as the economy is primarily driven and is heavily dependent upon the tourism industry. As a result of the segmentation of the industry, many times one segment offsets the other, even disguising developments in the industry. However, when both of the primary segments of the tourism industry have shown decreases, one must ascertain the reason(s) for these developments.

Traditionally, we would utilize the comprehensive indicator of the Turn-over-Tax (ToT) to ascertain a general macro economic perspective of the economy. However, due to unexplainable reasons we were unable to receive this information, despite numerous requests to authorities of the Federal government. Consequently, this report is regarded mainly as merely a reporting (or compiling to report) of the facts & figures of indicators from the various institutions. Thereafter, we will try to translate these developments into potential impacts on the economy.

When we look at the developments in the tourism, which is the main economic activity of which most economic activity is based either directly or indirectly, there is some cause for concern. As already mentioned, the tourism industry of St. Maarten is segmented into various aspects of which the most important categories are Stay-over tourism (i.e. Traditional and Timeshare), Cruise tourism, and Marine industry (Mega yachts, Regatta, etc.). The economy has many spin-off businesses from the businesses directly dependent upon the tourism industry. This translates into delayed direct effects on these industries as the tourism industry experiences its slowdown.

In essence, it is critical for these businesses that depend directly and indirectly on this industry to monitor the developments and the reasons for these developments. This will give them insight into methodologies to deal with their specific activity to make the necessary adjustments or implement, if required, structural solutions.

Developments in the Stay-over tourism industry has seen a decrease of 6.9%, primarily originating from the other non- North American markets. The decrease in Stay-over Tourism was mainly a direct result of the following markets namely, European, South American, and Rest of the World categories. This is rather ironic and serves to illustrate the resilience of the North American market in particular that despite the September 11, 2001 events, this market still showed positive developments. However, it should be noted that there might be some delayed effects, as the economy of the United States has not rebounded fully.

In addition, emphasis should be on the performance of the other markets to ascertain the reasons. Obviously, the economic crisis of the Latin American markets pose impediments for continued market penetration, which could lead to repositioning of present markets or pursuance of alternative destinations. This will offset the decrease of stay-over tourism arrivals as well as maintain the primary objective of minimizing the seasonal nature of the industry (or the off-season).

In previous years when stay-over tourism has experienced decreases, the cruise tourism was able to offset this decrease with significant increases in cruise tourism. However in 2001, even the cruise tourism has observed a decrease in its arrivals of 0.1%. This illustrates a rather insignificant change in cruise tourism, however coupled with decreases in stay-over tourism creates a double-blow to the economy. The industry was doing well until the September 11 events dealt it a temporary blow.

The timing of the September 11 events that occurred on the eve of our tourism season and the lingering effect because of the war on terrorism has create an economic slowdown throughout the entire world. This will naturally result in major contractions primarily in tourism based economies, both for businesses directly and indirectly related and/or dependent upon the industry. As a direct result of the timing of the incident, businesses are not able to acquire the required reserve to carry them through the off-season. Consequently, businesses maybe forced to lay-off, cut-back work hours and unnecessary operational costs, which will have a ripple effect throughout the economy.

These findings are supported by the banking figures where we observed a significant increase in residential deposits, illustrating potential uncertainty of the future. This has lead individuals to increase their savings in case they might be faced with unemployment. Similarly, the banks also witnessed a relative increase in residential loans. This increase is rather small compared to previous years as well as compared to the increase of residential deposits. This could mean firstly that the banks themselves are more cautious and uncertain about economic developments and subsequently, have restricted loans to minimize risks. Or secondly, individuals have not been taking risks either by requesting loans because of the same reasons of uncertainty of the domestic economy and world developments and its potential impact locally.

When we analyze the utility figures of water and electricity we witness moderate increases in these sectors in 2001, compared to 2000. However, further analysis suggests that there is also a slowdown when we compare developments (i.e. production/sales) in 2001, compared to 1999 and 1998. In those previous years (i.e. 1999-’98) the increases were higher and than the recent increase in 2001, compared to 2000. This is regarded as a slow down of this activity as the increases are increasing at a decreasing rate.

In the area of government revenue, the coffers have seen an increase in government revenue. This is relatively unique since 2001 experience the September 11 tragic events, which usually translates into a reduction of government revenue. This could be explained by the fact that government revenue will have a longer delayed effect or will be impacted later rather than immediately as businesses try to “weather” the storm. Eventually, when this is no longer possible the impact will be felt either through wage/income tax because of layoffs or either profit tax, as businesses can no longer sustain themselves in 2002.