Tromp praises Causeway: “This project will remove an obstacle to growth”POSTED: 01/28/14 12:12 PM
St. Maarten – President of the Central Bank of Curacao and St. Maarten Emsley Tromp was positive in his remarks at the inauguration of the Simpson Bay Causeway last Saturday. Speaking to a packed audience under the tent near the bridge the island’s most important banker said that, “For many years, traffic congestion in this area was a major obstacle; it had an increasingly negative impact on the quality of life on the island and was an impediment to economic growth. We are convinced that the completion of this infrastructure project will remove an obstacle to growth in Sint Maarten.”
The Central Bank was instrumental in financing the project with the issuing of bonds. “As you know, the Centrale Bank van Curaçao en Sint Maarten was involved in the financing of this important project. The Bank’s involvement, as I will elaborate on later, was motivated by our desire to help further the development of the capital market in Sint Maarten,” Tromp explained.
But Tromp also used the opportunity to reinforce his arguments for the maintenance of the monetary union between Curacao and St. Maarten, which at times felt more like an official economic statement from the Central Bank than a congratulatory speech on the successful completion of a large and complex infrastructure project. “I’d like to use this opportunity to discuss the main economic developments in the monetary union during 2013 and the economic prospects for 2014. My focus today will be on the economy of Sint Maarten,” he said.
Tromp then dove into economic stats, giving the audience an overview of St. Maarten’s general economic performance over the last few years since it became a constituent country within the Kingdom of the Netherlands in 2010. “Preliminary figures reveal that economic developments in the monetary union were mixed during 2013,” the banker said. “On the one hand, Sint Maarten recorded an economic expansion of 1.1%, which was a slowdown compared to the growth of 1.5% registered in 2012.”
Tromp went on to add that “an analysis based on preliminary data of the sectorial performance in Sint Maarten shows that the real GDP growth in 2013 resulted primarily from the manufacturing and the construction sectors, mitigated by a decline in the financial intermediation sector.” And that “real output growth in the manufacturing sector was the result of more repair activities on yachts that visited Sint Maarten.”
The central banker was optimistic for this year, saying “looking ahead, growth in Sint Maarten has to be seen against the background of developments in the world economy. In 2014, we expect world economic growth to accelerate supported by increased output growth in the advanced economies.” He also said that “Sint Maarten will benefit particularly from the projected improving economy of the United States. Therefore, real GDP in Sint Maarten is projected to expand by 1.6% in 2014 driven by increased activities in the tourism and transportation sectors.”
Tromp warned that “the decline in private credit extension in Sint Maarten clearly indicates certain weaknesses in the economy’s macroeconomic environment. These weaknesses may be the result of either a decline in the demand for credit or a reduction in the supply of credit by commercial banks.”
Tromp touched on the recent controversy that the Social Economic Council (SER ) stirred when it suggested the island dollarize and break with the monetary union because of Curacao’s deficits in its balance of payments. “The deficit in Sint Maarten has been declining during recent years while the deficit in Curacao has remained well above the benchmark of 4–5 % of GDP. Even though the center of gravity of the problem seems to be in Curaçao, both countries bear responsibility for addressing the situation of the balance of payments in the monetary union,” he said.
“In this regard, regular consultations and coordination of policy actions between the two countries are imperative. However, since 2010, the focus of the discussion has been on the political wisdom of a monetary union between Curaçao and Sint Maarten rather than on how this current situation should be addressed through coordinated actions. The balance of payments can be structurally improved if both countries strengthen their competitiveness vis-à-vis their main trading partners,” Tromp reasoned.
He ended his extensive and detailed speech by providing some advice to local policy makers. “We also must realize that as long as a monetary union exists, efforts that benefit growth in one of the countries of the union benefit the union as a whole. I am convinced that the positive spin-off of the Simpson Bay Causeway for the economy of Sint Maarten and thereby also the monetary union of Curaçao and Sint Maarten will prove that the actions of the central bank were right,” Tromp said.
“Looking ahead, for the further development of the corporate bond market, it is imperative that the government continues to ensure the sound management of public enterprises by strengthening corporate governance, including transparency and accountability. After all, sound and well-managed enterprises imply a lower risk premium and, consequently, a lower interest rate. This condition will lead to more investment and higher economic growth,” the chairman concluded.