RaboResearch - Economic Research

Country Report Sint Maarten

Country Report


Flag St Maarten

St. Maarten has experienced moderate economic growth in the last two years. One of St. Maarten’s challenges remains building up an institutional framework, as it currently lacks the human and financial resources to develop a good functioning administration.

Strengths (+) and weaknesses (-)

(+) High income level

Compared to other countries in the region, St. Maarten has a relatively high standard of living, with an income per capita of USD 23,292 in 2013.

(-) Institutional framework not fully developed

In October 2010, St. Maarten became an independent country within the Kingdom of the Netherlands. Since then, St. Maarten has been extending its institutional framework, although the process has proceeded slower than expected.

(-) Narrow economic base

Around 80% of St. Maarten’s economy consists of tourism, whereby a substantial proportion of tourists comes from the US.

(-) Weak external position

The large current account deficit and low level of foreign exchange reserves of the monetary union of Curacao and St. Maarten, expose the local economy to economic instability.

Key developments

1. Economic growth falls in 2013

Economic growth in St. Maarten decelerated from 1.5% in 2012 to 0.9% in 2013. From a sector perspective, the growth in 2013 can mainly be attributed to an increase in construction sector activity. The government currently invests in multiple infrastructure projects, among others an extension of St. Maarten’s airport. Other sectors that contributed positively were manufacturing and utilities, restaurants and hotels. Transport, communication and financial intermediation contributed negatively on the other hand.

2. External balance remains weak despite some improvements

St. Maarten and Curacao are in the same monetary union, which makes both countries interdependent with regards to their external balance. Combined, the two countries were running a current account deficit of -15.9% of GDP in 2013, a substantial improvement compared to 2012, when the deficit stood at 19.4% of GDP. The improvement can be fully attributed to Curacao. Curacao’s imports fell due to a decrease in domestic consumption, which as on its turn the result of an increase of the reserve requirement for banks. St. Maarten’s imports rose, but the island still ran a small current account surplus. Although the current account deficit of the monetary union has fallen, it is still considerable and since the deficit could not be completely financed through the financial account, the Central Banks foreign exchanges reserves declined further. The monetary union currently has an import cover of only 3.3 months.

A bigger balance of payments adjustment is therefore necessary. The fact that Curacao’s economy is more than three times larger than that of St. Maarten and that the current account deficit is fully caused by Curacao (although we note that the data must be interpreted with caution), implies that a reduction of the deficit must largely come from Curacao. Since a strong increase of exports is not expected, a reduction of the current account deficit has to be accomplished predominantly through a reduction of imports, which on its turn necessitates a fall of disposable income.

3. Public finances

One of the conditions set for debt relief by the Netherlands was that St. Maarten should among others run a balanced budget. However since 2010, St. Maarten has posted fiscal deficits. In 2013, the deficit amounted to -0.3% of GDP, compared to -1.3% of GDP in 2012. This improvement is the result of higher revenues and a fall in government expenditure. Meanwhile, St. Maarten lacks the human and financial resources to develop a good functioning administration. Both the Central Bank and the IMF mentioned this problem in recent publications. The lack of human and financial resources also partly explain why the 2013 budget was only approved on 16 September 2013. This delay has also resulted in the suspension of policy initiatives, as they were not executed or implemented. In March 2014, the budget for 2014 was approved, although the Dutch College Financieel Toezicht (the public sector financial supervision council) made some remarks with regards to the estimated revenues. In addition, St. Maarten’s government debt could not be determined, due to incomplete government data.

Figure 1: Economic performance
Figure 1: Economic performanceSource: Central Bank of Curacao and St. Maarten
Figure 2: Balance of payments
Figure 2: Balance of paymentsSource: Central Bank of Curacao and St. Maarten

4.    Elections are coming up

Parliamentary elections are scheduled to be held on August 29. Five parties collected enough signatures to be admitted to the elections; One St. Maarten People Party (OSPP), De Democratic Party (DP), de National Alliance (NA), de United People’s party (UP) and de United St. Maarten Party (US). Three others were not able to collect the required 138 signatures, 1% of the votes casted in the 2010 elections. Recent polls indicate that the outcome is uncertain, It may therefore be difficult to form a coalition.

5. Tensions between the Dutch and French part of the island

The island of St. Maarten consist of a Dutch and a French part. Statements by French officials suggesting that the Dutch part is to a large extent benefitting from French government aid and that it is unwilling to cooperate in certain fields has raised tensions between both governments. Both sides of the island largely depend on tourism, but the French part of the island is falling behind economically, as the main airport, casino’s and facilities for larger cruise ships are located on the Dutch part of the island. Mr. Urvoas, who represents the French part of the island in France, even tended to suggest that the 1648 Treaty of Concordia, which divided the island between the Dutch and French, should be reviewed. Prime-minister of the Dutch part, Sarah Wescott-Williams, said that the French were unfairly blaming the Dutch side of the island for the French-part’s own economic shortcomings.

Factsheet of Sint Maarten
Factsheet of Sint MaartenSource: CIA World Factbook, Central Bank of Curacao and St. Maarten, EIU

Background information

St. Maarten is a small island in the Caribbean, with a population of nearly 40,000 people and an economic size of less than USD 1 billion. As a result of the breakup of the Netherlands Antilles in 2010, St. Maarten became an independent country within the Kingdom of the Netherlands. St. Maarten receives some assistance from the Netherlands, in the form of technical support for issuing government debt, fiscal oversight and assistance on security matters. Besides, St. Maarten’s received debt relief in 2010 from the Netherlands, which helped the government to lower its debt ratio from 28% of GDP in 2010 to 22% of GDP in 2012[1]. St. Maarten is also developing its own economic and financial statistics. As this process is far from finished, is it highly likely that economic data will be revised in the coming years. This makes it difficult to draw precise conclusions on St. Maarten’s current economic performance.

St. Maarten has problems with different types of crime, which are difficult to solve due to understaffing of the police force. This understaffing, together with St. Maarten’s favourable geographical location, has attracted drug smugglers to the island. Moreover, money laundering is taking place on a large scale. Furthermore, stories about corruption and nepotism are frequently popping up. Although most are not proven, public administrators – including ministers – seem to be involved. Another not crime related issue is that due to its high standard of living – GDP per capita amounted to USD 23,293 per head in 2013 – St. Maarten is an attractive destination for immigrants. It is estimated that there are currently 15,000 illegal immigrants on the island. These immigrants have a big impact on both the labour market and public finances.

St. Maarten has a narrow economic base, as tourism accounts for 80% of the economy. Most tourists come from the US, which makes the country highly exposed to the US economic business cycle. In addition, its potential growth level is low, as it is hard to reach substantial productivity gains in the services sector. The country also has an high import dependency, making the country vulnerable for strong price fluctuations of both oil and foodstuffs. Since 2010, St. Maarten forms a monetary union with Curacao. As a result, the two countries have the same central bank and currency; the Antillean guilder (ANG). Furthermore, the ANG is pegged to the US dollar. This peg may become unsustainable if the monetary union proves unable to deal with the macroeconomic imbalances.

Economic indicators of Sint Maarten
Economic indicators of Sint MaartenSource: Central bank of Curacao, *Monetary Union data (so the data includes Curacao), ** In the Central bank latest report is it mentioned that St. Maarten was also running a deficit in 2011, but did not give a new figure.

Due to very limited data availability, figures presented in this report should be regarded as indicative.

According to the 2014 Article IV Consultation with Curaçao and Sint Maarten: Preliminary Mission Conclusions of the IMF (20 May, 2014)  “There remains an urgent need to upgrade the statistical infrastructure. Substantial data gaps hinder effective macroeconomic diagnosis and surveillance and complicate policy-making in both countries. For example, national accounts data are incomplete and published only with very long lags, there are no data on GDP deflators or on the international investment position, and fiscal data do not adhere consistently to international classification standards


[1] We note that the debt relief is not reflected in St. Maarten’s own debt statistics.

Maarten van der Molen
Rabobank KEO
+31 30 21 62666

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