Overall, developments of the key economic indicators that were monitored for the half year 2004 showed positive results. The majority displayed an upward trend, with significant increases relative to this same period last year as well as over the past few years. Leading growth patterns are shown in turnover tax, tourist arrivals, tourism-related government revenues and what seems to be an increased commitment to business activity; as entrepreneurs express growing levels of confidence in the future. Contrary to the sluggish developments that were experienced in much of 2003, forecasts for the remainder of 2004 and the half year 2005 are optimistic.

When reviewing consumer prices in St. Maarten up until the half year 2004, it is noted that overall prices rose by 2.1% between June 2003 and June 2004. While the average rate of increase in consumer prices for the half year 2004 is 1.5%. This figure may however increase if oil prices continue to rise and remain at these levels for an extended period of time. Added pressure will be placed on businesses as well as households; as escalated fuel costs could negatively affect business profits and reduce household spending resources after some time.

Current business activity on the island as measured by one of the chief economic indicators-Turnover tax is expanding. Even after factoring out the 1.5% average increase in consumer prices up until June 2004, TOT growth this year has proven to be substantial when compared to the last four years. Most likely due to improved business results during the strong tourist high season and new commercial ventures in the start of 2004.

Moreover, the number of business licenses issued by the Department of Licenses and Permits is also increasing. Total number of licenses issued was up by 77, when compared to the half year of 2003. Throughout this same period, a decline in the amount of requests to withdraw a license has been noted, showing that more persons are encouraged to invest in St. Maarten, and existing businesses continue to display higher levels of confidence in the economy. The majority of licenses issued by this department were for N.V.’s the total being 164, while 29 licenses were issued for sole proprietorships to persons born outside The Netherlands Antilles; the remaining 11 licenses were given out for partnerships and branch licenses.

Furthermore when looking at the number of registrations made by (naturalized) citizens at the Chamber of Commerce for a sole proprietorship during this period, a total of 395 was recorded. The figures highlight that there were 366 more registrations for sole proprietorships by (naturalized) citizens than were issued to persons born outside The Netherlands Antilles throughout this same period. This suggests that local entrepreneurs are showing considerable interest in opening this type of business, and is able to do so with a certain level of ease. Overall this category showed the most significant activity as the total number of local registrations for sole proprietorships surpassed the number of other licenses issued by 48%.

In assessing the main source of economic activity on St. Maarten- tourism, good results have been observed. The island has noticeably benefited from increased stay-over visitor arrivals this half year, as passenger traffic worldwide managed to climb above the pre September 11 levels. Stay-over tourism went up by 16.24% when compared to the first half of 2003, compared to 2002, there was an increase of almost 26%. The number of stay-over tourists that visited St. Maarten, last winter season continues to show steady growth, proving that this market is on a further rebound. Similarly, growth in the cruise tourism sector has been relatively consistent in the past few years; however this half year has seen the highest recorded number of visitors in the past fifteen years. Given the importance of the cruise industry in sustaining the island’s economy, further advancements within this sector will stimulate growth opportunities in other areas such as business and investments. Moreover, it also provides significant growth potential in the stay-over tourism market, if volumes of these cruise passengers can be converted into stay-over tourists.

Improvements within the tourism sector as mentioned above, were also reflected by major growth in government earnings from profit tax as well as direct tourism-related taxes namely room tax, rental- and timeshare tax. The upsurge in stay-over arrivals this half year contributed to an over 70 percent increase in collected room tax, and 25 percent increase in timeshare tax over last year. While income generated from both traditional hotel rooms and timeshare units had increased, it is noted that the growth rate in room tax is much higher.

This is also comparable with the analysis of the occupancy rates this half year. Hotel room availability on the island continues to be lower than timeshare, the same is true for its occupancy rates, as during the high season hotel occupancy was 13 percent less than timeshare units, however figures this year show that this margin is gradually becoming smaller. However, further analysis showed that there was little variation in timeshare room occupancies between the high season and the start of the off-season. Whereas, traditional hotel rooms recorded lower occupancies throughout the start of the tourist low season.

Notable however, is despite the increases in the aforementioned earnings, overall government revenues declined slightly by less than 1 percent in the first six months of 2004 over this period in 2003. This was attributable mainly to decreases in income tax and ‘other’ revenues. The largest contributor towards total collected government revenues was wage tax; a moderate increase of approximately six percent relative to last year was recorded.

Significant growth patterns were also observed in AVBZ premiums this year, the first quarter recorded a sizeable increase over the first three months of 2003, which suggest an upturn in the employment situation on the island when compared to this period last year, as figures at that time were down some 7 percent over the same period in 2002. Developments in the AVBZ premiums collected in quarter II were consistent with increases noted in wage tax, although AVBZ had progressed more.

Developments in the banking sector show an increase of almost 13 percent in total deposits during the first half of 2004 over 2003 and an even further increase of approximately 17 percent over 2002. Attributable to continuous growth in demand deposits and savings. Total resident loans, which encompass business loans as well as individual loans displayed moderate growth. While the number of individual loans went up due to an increase in the number of mortgages granted, the amount of business loans secured went down. Although developments in small business have picked up, business loans have been on the decline since the last quarter of 2003, this could be an indication that these are being financed mainly through personal savings and other means, rather than from loans.

In further support of the notion that the island’s economy has expanded throughout the half year 2004, the utilities sector also showed a positive performance. Total electricity and water production increased over the same period in 2003. Electricity demand has been on the rise this half year due to two main factors; firstly an expansion in the commercial sector due to an increase in small businesses and secondly the drop in air-conditioning prices which led to an increase in purchases as well as electricity usage.

Analysis of the developments in gasoline industry indicates that the industry showed signs of market expansion in the first half of 2004 relative to that of 2003 as sales indicated an increase of 24%. While the gasoline industry is driven by price changes and tourism, there is also an indication that the euro has played a significant role in the developments on the Dutch side. A combination of the exchange rate of euro against the dollar and the increase in the world market prices also played an instrumental role in increasing the sales on the Dutch side. It should be noted, that the effect of the euro was noticeable in the increase in sales of the gasoline stations closest to the French side.