Published On: Wed, Jun 1st, 2022

Central Bank projects strong economic growth

PHILIPSBURG — St. Maarten’s economy could grow by as much as 14.3 percent this year, but the Central Bank warns that the length and the intensity of the war in the Ukraine could have a mitigating effect. “It is therefore likely that inflation will further increase and that the economic growth will be lower than projected,” the bank writes in its 2021 annual report.

Things are nevertheless looking up for St. Maarten. The Central Bank expects a strong increase of foreign demand due to a significant increase of exports and an increased recovery of stay-over and cruise tourism. However, increased imports due to higher domestic demand and touristic expenditures will temper net foreign demand.

The report states that domestic demand will increase due to private as well as government expenses. The increase of private investments stems mostly from large-scale projects like the reconstruction of the airport. Private spending will increase because of improvements in the labor market as activities in the tourism sector will increase. The bank expects a moderate increase in government spending, driven by higher expenditures for salaries and goods and services.

The (expected) powerful economic recovery will result in lower unemployment, from 15.8 percent in 2021 to 10.6 percent in 2022, though inflation will remain high at 4.1 percent.

Financially, the Central Bank did not do well in 2021: it recorded a loss of 2.9 million guilders ($1.6 million), a result that is 1 million guilders better than the loss in 2020. Income from foreign exchange investments fell in 2021 by 8.8 million guilders ($4.9 million) due to relatively low interest rates. Over the next couple of years the bank expects better results because interest rates are on the rise again.

The bank aims to make its supervision tasks self-supporting by passing on all costs to the supervised financial institutions.