St. Maarten Finance minister’s report confirms Central Bank growth projectionPOSTED: 05/30/11 1:48 PM
St. Maarten – Finance Minister Hiro Shigemoto’s financial report to Parliament for 2011 confirms the Central Bank of Curacao and St. Maarten’s prediction that the economy will likely experience little to no growth in the year 2011. The minister had taken issue with the Central Bank’s prediction that growth in the first quarter would be between 0 and 0.3 percent. The figure he’d used in the budget was 1.3 percent. Figures now show the Central Bank was correct.
Government considers the revenue it collects as a main economic indicator. In this instance the minister states that the government collected 109 million guilders in the first quarter of 2011. That is the same amount that government collected in 2010, confirming the Central Bank’s prediction. The reason for the revenue staying the same is a mix between being able to collect more of certain taxes while collecting less of certain others.
“There is a decline in wage tax/income tax income and possibly profit tax income, however this decline is compensated by an increase in turnover tax, transfer tax and concession fees,” Shigemoto says in his note.
In a further analysis the minister points out that while income and wage tax increased over the last 10 years due to strong economic growth, both have seen declines in the last “couple of years.” Both taxes accounted for 10 percent of the island’s gross domestic product in 2001. They accounted for eight percent of gross domestic product in 2010. The four potential reasons for the fall off are an increase in the minimum tax free income level, a decrease in compliance/increase in the informal sector, an increase in tax reimbursements as part of the elimination in the backlog of income tax assessments and unreliable figures for the gross domestic product or actual declines in economic activity. Actions are already being taken to address the issue of compliance through the setup of a Compliance Team, which is carrying out a plan of action.
While the government collected 109 million guilders in the first quarter, the minister reports the government spent roughly 93 million guilders. The 93 million is a preliminary figure. The prorated figure that the government had projected to spend was 105 million, leading to under spending of nearly 13 million.
“Due to the lack of an approved budget 2011, actual spending was based on maximum allowed spending level of roughly 30 million guilders per month,” Shigemoto writes in his note.
The government invested 250, 000 guilders in fixed assets in the first quarter and paid out 1.6 million guilders in study loans. More generally the planned capital investments for 2011 have been delayed because the budget has not yet been signed into law and the loan agreements cannot be completed until this is the case. The delay affects mainly infrastructural works and the minister predicts this will lead to a slowdown in economic growth.
The government stayed liquid in the first, but the amount of cash that was readily available was small. Shigemoto reports that government had 90 million guilders in the bank on March 31. Some 73.3 million guilders was in time deposits leaving government with 16.7 million in available cash.