Upon review of all the major economic indicators, which the Department of Economic Policy & Research (DEPR) monitors, growth continued to be the order of the day in the first half of 2001, compared to the first half of 2000. It should be noted from the outset that this general review of the economy does not take into account the various individual and/or sectorial developments. The reason for this is the Island Government of St. Maarten does not have the legal authority to requests this information, as this is the responsibility of the Federal Government. However, seeing the importance of this information the Department of Economic Policy & Research has engaged in an Investment Survey to acquire more detailed information on the performance of each sector of the economy.

Despite the lack of information on a Federal level, the following nine major economic indicators (amongst others) were utilized namely, Turnover tax (ToT), Cruise Tourism, Stay-over Tourism, Weighted Tourist days, Residential Deposits, Residential Loans, Government Revenue, and electricity and water sales of GEBE. All of the above-mentioned indicators have shown growth. This points to the fact that the economy continues to expand.

One of the primary reasons for the continued expansion is the comparison of the first half of 2001 against the first half of 2000, which gives all positive figures. Naturally, when we look at the first half of 2000 this period suffered delayed effects of Hurricane Lenny, which occurred in November of 1999. This delayed effect spilled over into the first half of 2000, resulting in inflated increases in 2001. For this reason, we also compared the first half of 2001 against the first half of 1999. This methodology will factor out the impact of Lenny, to ascertain whether there is actually growth in the economy, which has resulted in a confirmation of our expectation of growth in the economy as there was positive growth in all the above-mentioned economic indicators, with the only exception being that of stay-over tourism.

Analyzing the various economic indicators separately, we first look at developments of the Turn-over-Tax (ToT). The ToT is considered the most important indicator, as it is a tax, which is based on the turnover of business activity. So if the Turnover tax increases, this implies that consumption had to have increased. Naturally, we would have to factor out inflation. Information from the Central Bureau of Statistics’ (CBS) Press Release of August 17, 2001, has shown a relatively flat or insignificant change in inflation in 2001 of 0.1% in April, compared to February 2001, and 0.8% in June, compared to April 2001. Considering the above-mentioned and the increase of ToT in 2000, compared to 1999, this shows that the economy is indeed expanding.

The increase and volume of the cruise tourists market primarily drove the economy and subsequently, increased ToT. The cruise tourism industry showed an increase in the first half of 2001, relative to 2000. Naturally part of this increase is a direct result of the drastic reduction of the industry in 1999 caused by Hurricane Lenny, which also spilled over into the first half of 2000. This resulted in an increase in the first half of 2001 when we compared it to the first half of 2000. For this reason, we factored out the decline of Lenny by comparing the first half of 2001 with the corresponding period of 1999 and St. Maarten still observed a double-digit increase, in cruise tourism.

If there would be one economic indicator that showed growth, however caution would be more appropriate to describe, as not to be too optimistic and subsequently, not realize the real developments of the industry, it would be in the area of stay-over. With respect to stay-over tourist arrivals, we experienced a slight increase in the first half of 2001, compared to the first half of 2000. The expectation when things are going good is that after a year of a hurricane, all or most economic indicators should show astounding increases because the preceding year experienced set-back(s). When we observe moderate increases following a year of hurricane(s) or setback(s), then this requires an immediate analysis and rectification.

To illustrate the caution, when we compare this period against the first half of 1999, to factor out the Lenny impact, we observe a decrease in stay-over, despite an increase in our primary tourists market of the United States. Nevertheless, the moderate increase in stay-over tourists also spilled over into the government revenue where we observed tremendous increases of government revenue. There were increases, in particular in the tourist-related revenue for government of room, rental, and timeshare taxes. This has lead to the conclusion that the Timeshare industry has remained resilient and steadfast against all odds that St. Maarten has faced. This finding is strengthened by the fact the numerical total of Timeshare Tax has doubled in its contribution relative to Room tax. In addition, the American market has seen a significant increase, which illustrates that the Timeshare is certainly keeping stay-over tourism afloat, when we consider the significant numerical total of the corresponding tax. A contributing factor to this event may be the number of hotel rooms on the island during this period versus the number of Timeshare, however does not negate the contribution of the Timeshare industry and even serves to prove the significant contribution of this industry to the economy of St. Maarten.

When we consider the economic impact of the cruise tourist and stay-over tourist, numerically and statistically, one arrives at the Total weighted-tourist days. This figure distributes the relative contribution of the various types of tourists, 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. When we calculate this figure, we observe an increase in the first half of 2001, relative to the corresponding period in 2000.

Upon review, we realize that there is a relatively close approximation to the increase of ToT and the total weighted-tourists’ days, reflecting a relatively close correlation, when we take into account the relative impact of the various types of tourist markets. In the final analysis, St. Maarten has done relatively good especially in cruise tourism. However, we need to ascertain, monitor, and develop strategies to increase the level of stay-over in particular since we have increase capacity at PJIAE and Maho hotel has reopened.

Looking at developments in the banking industry, we also observed growth in the economy. The residential Deposits witnessed a double-digit increase in the first half of 2000, compared to the first half of 2000. And in the residential Loans, we see a whopping increase in the same period of the first half of 2001, compared to 2000.

Government has witnessed a whopping increase in revenue during the first half of 2001, relative to the corresponding period of 2000. This was mainly fueled by increases in the tourism related taxes of Timeshare, Room, and Rental tax. These developments would have certainly alleviated the persistent liquidity challenges of government, however this situation naturally will illustrate positive developments in the first half of the year as our economy is based on the seasonal aspect of tourism. Naturally, the first half year report corresponds to the tourists season, which will gave growth figures for the tourist related taxes, which we expect to drop off significantly after the first half. Consequently, this will result additional liquidity challenges for government as the consumption is expected to contract. This liquidity challenge continues to put additional strain on promotional activities such as marketing, which will undoubtedly affect the stay-over arrivals. As mentioned already, a partial explanation for the liquidity problems can be the assessment and/or collection of taxes. This particular issue needs to be addressed to continue to promote the island, thereby acquiring additional revenue. In interim period, a possible solution could be to appropriate the taxes directly obtained from tourism towards marketing of the island.

Due to the lack of detailed and updated data, it should be noted and we have to consider the possibility that the figures may be concealing developments, which may exist. This may lead to the realization that the projections of the economy may be off by a slight margin.

Considering the above-mentioned, 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. When we observe marginal increases in key indicators (i.e. stay-over tourism), 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, it would be safe to assume that there was real growth in the economy.

In conclusion, we observe growth in the economy, in particular, considering major developments such as the Harbor having been completed; the airport’s capacity has been expanded significantly, and the expansionary monetary policy of the Central bank of the Netherlands Antilles. Since St. Maarten did not experience a hurricane in 2001, however the 911 tragic event affected us negatively and possibly worse than a hurricane as there was no capital injection into the local economy to maintain a level of domestic consumption.

In addition, caution is also justified as the economy of the US has been officially declared in a recession. This could lead to additional contraction of consumption and less traveling due to the recession and the “fear of flying” due to the 911 event has not been overcome. However, in the final analysis, we believe that our economy will experience continued growth as the expectation that cruise tourism will continue to expand by early estimates of the Harbor by 10%, as well as that Timeshare will continue to support our stay-over tourism. Together with our renewed expansions plans, projects, and capacity, St. Maarten will experience significant growth. In addition, a renewed call for economic diversification is imperative to jumpstart the economy, create jobs and alleviate the liquidity challenges of government for additional and continued export (i.e. tourism) promotion.