Economic Affairs published Macro Monitor 2012: Smaartmodel projected 5% economic growth

POSTED: 01/4/13 1:09 PM

St. Maarten – The Ministry of Economic Affairs predicted in its Macro Monitor that the local economy would grow by a sturdy 5 percent in 2012. This is in sharp contrast with a report from the Central Bank of Curacao and St. Maarten: at the beginning of last year, the bank predicted that the economy would not grow at all, but that it would shrink by 0.3 percent.

The Macro Monitor the ministry published on its website this week covers the real developments in the first six months of 2012. The data used for the report were compiled, collated and analyzed in an Excel spreadsheet dubbed Smaartmodel. “This model is an analytical tool to present a holistic view of the operation of the economy,” the report states. “It was built from scratch using past historical data on the various sectors of the economy.”

The main purpose of Smaartmodel is “to analyze the economic impact of fiscal and monetary policy decisions, and the monitoring and forecasting of key economic indicators.”

The report adopted “a number of assumptions” for its projections. The economy’s expansion by 5 percent is one of these assumptions. The report’s authors also assumed that unemployment would decline from 12.7 to 11 percent by the end of 2012, that government revenue would increase, that inflation would increase to 4.1 percent and that imports and exports would both increase.

The justification for the 5 percent economic growth is the 10 percent increase in cruise passenger arrivals and the 11 percent increase in stay-over tourism in the first half of the year, the report states.

It furthermore mentions “increased investments and increased employment for 2012” as indicators that unemployment will go down.

The report makes once again clear how the local economy depends on tourism: 75 percent of all exports are tourism-related. The North-American market accounts for 60 percent of stay-over tourism; Europe adds 16 percent.

In the first six months of last year stay-over arrivals from the Caribbean region increased by 8.9 percent. “According to the Caribbean Tourism Office individuals within the region stay a shorter period on the island but they spend more than individuals from other regions who stay longer. This implies that more focus should be placed on the region in terms of marketing St. Maarten as a shopping hub,” the report states.

The increase in stay-over tourism is due to “the continual promotional rates of the hotel industry” – a clear indication that hotels had to slash prices to attract customers. The report does not say how this affects the industry’s profitability. Instead, it mentions that stay over tourism was above average during the first six months of 2012 compared to the same period over the last ten years.

The occupancy rate in hotels was therefore higher than in the first half of 2011. Apart from lower rates, the sector has also switched to marketing all inclusive packages. The Sonesta hotels in Maho and Great Bay, good for a combined 777 rooms (more than half of the available hotel rooms in St. Maarten – also shifted to all inclusive offers.

The timeshare industry recorded an average occupancy rate of 61.9 percent, compared to 65.9 percent for the hotel sector. Both hotels and timeshare peak in February (with 81.4 and 87.3 percent occupancy), but these percentages drop sharply toward the summer. In June hotels recorded 47.5 percent and the timeshare projects 61.9 percent. Both sectors have something in common though: the occupancy rates in the second quarter were significantly higher than in the same period in 2011.

For cruise tourism, the report made an accurate projection for the whole year of a bit more than 1.7 million arrivals. In the first six months arrivals totaled slightly over 1 million, about 100,000 more than in 2011. This sector peaks in the first three months, with for instance 250,000 in January and declines gradually in the second quarter, to 77,000 in June.

From the report it appears that government revenue did not keep up with spending: revenue in the first 6 months was up 10 percent, but expenditures increased by 12 percent. Revenue still outpaced expenditures in absolute numbers by 235 to 215 million guilders ($131.3 to $120.1 million).

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