CUPECOY–St. Maarten’s living standards are under pressure. Population has grown faster than the real economy, so real GDP per person has moved down. Economist Jason Lista, speaking at the Governor’s Symposium, said the evidence points to one conclusion, policy and decision making must change if the country is to regain ground over the next decade.
“Change is the law of life,” Lista said, quoting President John F. Kennedy. Looking only to the past or the present risks missing the future. The data show what needs to move now, productivity, fair taxation of new tourism forms, an energy plan that lowers cost, social fund reform before reserves are exhausted, and a statistical system that supports honest decisions.
Lista described the setting in which that change must occur. St. Maarten is a small, open, tourism dependent economy with high import needs. It faces hurricanes and swings in global travel, and the open border with Saint Martin makes measurement more complex. The current recovery has been driven by one of the fastest rebounds in stayover arrivals in the Caribbean and a construction surge. Cruise tourism has been slower, yet is improving. He expects stayover arrivals to exceed pre pandemic levels this year, which would be a clear milestone, but he also noted that the island now has the highest tourism density per square kilometer in the region, a signal that carrying capacity must be managed.
He organized the period since 2010 into three parts. After country status, growth was modest and policy continuity was weak. The next period was defined by sharp contractions after Hurricane Irma and the pandemic, followed by strong rebounds as travel resumed. The current period shows growth that is slower than the rebound phase, yet on a higher path than the early 2010s. Real GDP is projected to grow by 2.8 percent this year and 2.4 percent next year, supported by the return of room inventory and full airport operations. Public finances moved in a similar pattern, with severe strain during the pandemic and improvement as revenues recovered.
External support limited the damage. The Netherlands provided zero interest liquidity loans equal to about 20 percent of GDP during the collapse in travel, and a 520 million dollar grant, roughly 32 percent of GDP, to a Trust Fund for reconstruction. That Trust Fund remains a principal source of public investment. Even with these buffers, the debt to GDP ratio rose from 26.4 percent in 2010 to a projected 42.4 percent in 2025, reflecting crisis borrowing and the temporary fall in GDP during the shocks.
The structure of the economy has changed little. Tourism still generates close to 70 percent of foreign exchange, similar to 2011. Foreign direct investment lags regional peers as a share of GDP, which Lista linked in part to a mature tourism product and limits on absorbing ever higher visitor volumes. Political turnover has added uncertainty. Against a four year electoral cycle that would imply three governments in fifteen years, St. Maarten has had around fourteen governments, which has hindered steady policy and execution.
Tourism is also changing in composition. Short term rentals account for about two thirds of traditional hotel room inventory in 2024. The IMF estimates STR revenues at about 5.5 percent of GDP, with average daily rates higher than most of the Caribbean, yet with lower labor intensity than hotels. STRs have a tax advantage over hotels. Capturing that base would yield about 1 percent of GDP in revenue, which would help offset pressure on hotel occupancy and support fair competition.
Infrastructure strains are visible. The 2024 energy crisis produced rolling blackouts as aging heavy fuel generators failed during a period of high demand. Temporary diesel units stabilized supply, yet at a higher cost per kilowatt hour than regional peers. Per capita electricity supply has fallen since 2010, and long lead time replacements are still pending. There is no renewable mix in place under current concession constraints, which limits options to lower costs and improve resilience.
Social insurance requires urgent attention. Without reform, health care and pension funds are unsustainable. Reserves could be depleted by 2029, and AOV would require ongoing subsidies of about 1 to 1.5 percent of GDP, which would place further weight on the budget.
Lista said a common pattern ties these facts together, change. External shocks forced rapid adjustment, and now internal choices must drive deliberate change. He identified one foundation for that process, better statistics. The country needs quality, high frequency data to guide decisions, and the open border with Saint Martin requires joint measurement. He cited cooperation between the CBCS and the French counterpart EDOM through an MOU, and said continued staffing and technical support, including from CARTAC, should be pursued to close data gaps.
His policy direction is to shift from a model based on ever higher visitor counts to one based on higher value per visitor and broader local participation. That shift requires coordinated investment in skills, service quality, accommodation upgrades, energy reliability, and core public infrastructure. It also calls for a level tax field across hotels and STRs, timely energy investments that bring down cost, and early reform of health and pension funds to protect reserves.
Source: The Peoples Tribune https://tribune-site.webflow.io//articles/economist-jason-lista-living-standards-are-slipping-policy-must-match-population-growth
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