Central Bank reports on ‘uneven developments’ in monetary union

September 9, 2016

WILLEMSTAD/PHILIPSBURG–Economic developments in the monetary union were uneven in the first quarter of 2016. Curaçao recorded a real GDP contraction, while St. Maarten’s economy expanded in real terms, according to the Quarterly Bulletin of the Central Bank of Curaçao and St. Maarten.

Real GDP contracted in the first quarter of 2016 by 0.2 per cent in Curaçao, while the economy of St. Maarten expanded by 0.4 per cent. Meanwhile, the decline in international oil prices dampened inflationary pressures in both countries. Curaçao registered zero inflation, and St. Maarten recorded deflation resulting in an average drop of 0.9 per cent in consumer prices during the January-March period of 2016.
In Curaçao, private sector activities contracted during the first quarter of 2016 primarily because of lower production in the manufacturing, restaurants and hotels, and financial intermediation sectors.
Output contracted in the manufacturing sector as a result of lower refining and trading activities by the Isla refinery. The disappointing performance of the restaurant and hotel sector reflected mainly a decline in the number of visitor nights, despite an increase in the number of stay-over visitors. Also, the number of cruise visitors dropped.
Furthermore, a decline in real value added in both the domestic and international financial services industries caused the contraction in the financial intermediation sector.
Activities contracted also in the wholesale and retail trade and transport, storage, and communication sectors. The negative outcome in the wholesale and retail trade sector was the result of fewer activities at the free zone and lower tourism spending, moderated by an increase in consumer spending.
The contraction in the transport, storage, and communication sector was attributable to a decline in passenger transportation services provided by the domestic airlines to go abroad. The decline in activities in most sectors was mitigated by a rise in the utilities and construction sectors. The utilities sector expanded in the first quarter of 2016 because the production of both water and electricity rose.
Meanwhile, the growth in the construction sector was driven by a rise in private and public investments.
According to the Bank’s estimates, the main drivers of St. Maarten’s real GDP expansion in the first quarter of 2016 were the restaurants and hotels, manufacturing, construction, and real estate, renting, and business services sectors. The growth in the restaurants and hotels and real estate, renting, and business services sectors was sustained by more stay-over visitors.
By contrast, cruise tourism recorded a sharp decline because of, among other things, increased regional competition. Meanwhile, real value added in the manufacturing sector expanded because of an increase in yacht repairs. Furthermore, growth in the construction sector was caused solely by a rise in private investment activities as public investment dropped.
In addition, real output grew at a slower pace in the utilities and transport, storage, and communication sectors. By contrast, a contraction in the wholesale and retail trade and financial intermediation sectors put a drag on St. Maarten’s first-quarter growth.