WILLEMSTAD/PHILIPSBURG - Economic developments differed between Curaçao and St. Maarten. While Curaçao recorded a modest expansion of 0.3 per cent in real output, St. Maarten’s economy contracted by 0.3 per cent in real terms in the third quarter of 2015, President of Central Bank and Curaçao and St. Maarten Emsley Tromp said in the Bank’s 2015 third quarter report.

 

“In addition, inflation dropped in both countries, reflecting primarily the impact of lower international oil prices,” he added, noting that St. Maarten’s inflation remained flat at 0.0 per cent compared to 1.9 per cent the year before, while Curaçao’s inflation fell to -0.2 per cent, down from 2.7 per cent in the same period in 2014.

 

“Curaçao’s modest real economic growth during the third quarter of 2015 stemmed solely from an increase in public demand. Both government consumption and investment contributed to the increase in public demand,” Tromp said. “Consumption rose because of a larger outlay on goods and services, while investment increased as a result of the construction activities of the new hospital and the upgrading of Curaçao’s road infrastructure,” he said.

 

“Real GDP growth was dampened, however, by a decline in private demand due to a fall in private consumption offsetting the growth in investments. Furthermore, net foreign demand dropped, as the export of goods and services declined at a faster pace than imports,” he continued. Curaçao’s third quarter GDP growth in 2015 was largely in the construction, manufacturing and transport, storage and communication sectors.

 

“Real output in the construction sector expanded because of the increase in private and public investments,” he said, adding that “real value-added growth at the Isla refinery and more ship repair activities led to the expansion in the manufacturing sector. The transport, storage, and communication sector performed well because both air transportation and harbour activities rose.

 

“Growth weakened in the restaurants & hotels sector as a result of a slowdown in stay-over tourism combined with a decline in cruise tourism,” Tromp said. “Stay-over tourism rose at a slower pace compared to a year earlier, because the increase in the North American, European and Caribbean markets was mitigated by a contraction in the South American market.”

 

Tromp explained that real value added contracted, however, in the wholesale and retail trade, financial intermediation, and utilities sectors of Curaçao. The development in the wholesale & retail trade sector stemmed largely from lower domestic spending and fewer activities at the free zone, though offset by an increase in tourism spending. Activities in the financial intermediation sector dropped because of negative contributions of both the domestic and international banking sectors, he said.

 

“On the fiscal front, the government of Curaçao recorded a budget surplus of NAf. 17.1 million in the third quarter of 2015, a turnaround compared to the NAf. 0.4-million deficit registered in the third quarter of 2014,” he pointed out, which was driven by an increase in revenues, though mitigated by a growth in expenditures.

 

“Government revenues rose as a result of increases in both tax and non-tax proceeds. The rise in tax receipts was sustained by increases in property taxes, profit tax, and import duties, mitigated by a drop in wage and sales tax earnings,” he continued.

 

Meanwhile, the increase in non-tax revenues was supported primarily by the inflow of funds from the tax arrangement of the Kingdom (BRK). Higher disbursements on transfers and subsidies combined with more outlays on goods & services caused the rise in government expenditures, moderated, however, by a decline in wages & salaries expenditures.

 

“According to the Bank’s estimates, St. Maarten’s third-quarter contraction was attributable to a decline in both domestic demand and net foreign demand,” Tromp explained.

 

“The negative contribution of net foreign demand to real GDP growth was the result of exports dropping faster than imports. The decrease in domestic demand was related to lower public demand, partly offset by an increase in private demand. Public demand dropped because both public consumption and investment contracted. Meanwhile, private demand rose as a result of an increase in private investment, while consumer spending dropped,” said Tromp.

 

Contracts

 

Available data reveal that real output in St. Maarten contracted because the increase in the restaurants and hotels and utilities sectors was offset by declines in all other main sectors of the economy.

 

“Activities in the restaurants and hotels sector increased during the third quarter of 2015, albeit at a slower pace compared to the third quarter of 2014, because of a growth in stay-over tourism as reflected by a higher hotel occupancy rate,” Trump pointed out.

 

“However, cruise tourism was down in line with the decline in the number of cruise ships that visited the port of Philipsburg,” he added.

 

Tromp said St. Maarten continued to face budgetary woes during the third quarter of 2015 reflecting the sizeable arrears to the Social & Health Insurances (SZV) and the General Pension Fund (APS).

 

Current account

 

“According to preliminary data and estimates of the Bank, the current account deficit on the balance of payments widened during the third quarter of 2015 compared to 2014’s third quarter as a result of a worsening of the net export of goods and services and the income balance,” Tromp stated.

 

By contrast, net current transfers into the monetary union rose, mitigating the increase in the current account deficit. The decline in net export of goods and services was ascribable to a drop in exports that exceeded the lower import bill.

 

“Exports dropped because of lower revenues from bunkering activities and lower re-export by the free-zone companies in Curaçao. In addition, foreign exchange receipts from tourism, particularly cruise tourism, were down in both Curaçao and St. Maarten. Meanwhile, oil imports shrank in both countries, reflecting the sharp decline in international oil prices,” he explained.

 

“Furthermore, merchandise imports by the wholesale & retail trade sector in the monetary union dropped because of a decline in domestic spending. Gross official reserves declined during the third quarter of 2015, as the external financing and capital transfers were insufficient to cover the current account deficit,” Tromp said.