{
  "title": "Kingdom of the Netherlands – Sint Maarten: Staff Concluding Statement of the 2023 Article IV Consultations Mission",
  "publication": "IMF News, May 30, 2023",
  "sourceUrl": "https://www.imf.org/en/news/articles/2023/05/30/sint-maarten-staff-concluding-statement-of-2023-article-iv-consultations-mission",
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  "summary": "Sint Maarten is experiencing strong recovery growth led by tourism and investment, but the benefits of growth are slow to reach the rest of the economy.",
  "publishDate": "2023-05-30",
  "sections": [
    {
      "heading": "Key takeaways",
      "content": "- Sint Maarten is experiencing strong recovery growth led by tourism and investment, but benefits of growth are slow to reach the rest of the economy.\n- With narrowing fiscal and external deficits, the time is ripe to advance key fiscal and structural reforms, including medium-term investment planning and execution and streamlining business procedures.\n- Capacity limitations exist in economic statistics and financial intelligence and require adequate resourcing."
    },
    {
      "heading": "Economic developments and outlook",
      "content": "- Output and growth\n  - Sint Maarten grew an estimated 10 percent last year.\n  - Output per capita is expected to surpass pre-pandemic levels this year and pre-hurricane levels next year.\n  - Growth led by buoyant tourism arrivals and robust private and public investment.\n  - Formal employment rose by 5 percent last year but remained below even the 2020 average.\n  - Indicators (consumer credit growth down, subdued car demand, social assistance beneficiaries not falling meaningfully) suggest a job-poor recovery that is slow to reach households.\n  - Major investment projects experienced delays due to supply chain and commodity price difficulties.\n\n- Tourism dynamics\n  - Stayover arrivals grew 50 percent in 2022, putting them substantially above their pre-pandemic levels.\n  - Hotel room inventory is higher now than before the pandemic and growing, but room stock is still more than 15 percent below pre-hurricane capacity and will recover slowly, expected to increasingly act as a bottleneck.\n  - Cruise arrivals are growing quickly from lower levels but are also expected to slow.\n  - Tourism recovery will slow well before achieving pre-hurricane numbers.\n\n- External sector and inflation\n  - The current account deficit narrowed dramatically, down nearly twenty percent of GDP to an estimated 2.7 percent of GDP in 2022 and expected to reach balance in 2024.\n  - Tradable goods prices broadly tracked U.S. inflation with a sharp impact on energy prices.\n  - Inflation was 3.8 percent, kept lower than expected by a subdued housing sector.\n  - Inflation is expected to slow slightly this year then normalize quickly.\n\n- External support\n  - The US$520 million, grant-financed Trust Fund for hurricane reconstruction remains the principal source of public investment and an important driver of growth.\n  - The Netherlands provided liquidity support through the pandemic, conditional on a reform program (landspakket) that delivered technical assistance and policy improvements."
    },
    {
      "heading": "Fiscal reforms and public finances",
      "content": "- Recent fiscal performance and outlook\n  - The overall fiscal deficit was 1 percent of GDP last year, down from 6 percent the previous year and smaller than the budgeted figure.\n  - Performance driven by under-execution of the wage bill on sluggish hiring and goods and services, with support from buoyant growth-related revenues.\n  - Government debt to GDP ratio is projected to decline by 7 percentage points by the end of the forecast horizon, placing it in the bottom quintile of Caribbean economies.[2]\n\n- Debt treatment scenarios\n  - In the baseline, pandemic-era liquidity loans falling due in October are refinanced as long-duration bullet loans.\n  - An annuity structure would result in additional reduction of debt to GDP, with the reduction in the debt stock partially offset by a reduction in GDP from compressed expenditures.\n\n- Policy priorities\n  - Reverse earlier compression of high-quality expenditures and move forward with revenue reforms.\n  - Consider further increases in spending for improved public services, wages in key capacity areas, and transfers to clear outstanding domestic payment arrears to the pension fund and SZV.\n  - Raise domestic revenue by completing the cleansing of the tax database and ensuring that current tax payments are properly reconciled with taxpayers and tax types.\n  - Conduct a functional review of the Ministry of Justice to ensure consistent job grading, aligned with hiring needs and offering competitive wages.\n  - Continue steps to build public investment capacity: 2023 budget marked the first approval of public investment projects since the hurricanes; Trust Fund execution is expected to be substantial through 2027, and large additional public investment risks hitting supply constraints in the construction sector.\n  - Strengthen Ministry of Finance forecasting capacity and link medium-term budgeting to key policy measures and budget discussions.\n  - Ongoing efforts to develop a debt management strategy with IMF technical support are welcome to support financing scenarios and capital expenditure plans.\n\n- Financial management and revenue administration\n  - Addition of six staff in the tax office has helped ease staffing constraints and may underlie recent positive results.\n  - Rollout of recently approved tax and financial management systems is expected to underpin improvements in tax administration and expenditure management."
    },
    {
      "heading": "Supply-side reforms and governance",
      "content": "- Business environment and public services\n  - Meaningful progress toward e-government, but processes need to be end-to-end to realize efficiency gains.\n  - Priority reforms: reduce turn-around time for work permits, business licenses, and building permits.\n  - Initiatives to establish single-window transactions and increase coordination between government agencies could benefit from a firmer timeline.\n\n- Financial Intelligence Unit (FIU) and AML/CFT\n  - FIU has updated laws and advanced key legislation but requires an expanded budget and competitive wages to attract and retain staff.\n  - Dedicated financial crimes counterparts are needed in law enforcement and prosecution; integration with the FIU could be considered.\n  - The national risk assessment process is underway and must conclude in advance of the 4 th round Mutual Evaluation scheduled for September 2024.\n  - Laws underpinning a gaming authority and strengthening the FIU’s sanctioning authority are needed.\n  - The ultimate beneficial ownership registry, approved by legislation in 2019, should be prioritized.\n\n- Statistics and data capacity\n  - GDP compilation has rapidly improved in timeliness and reliability; inflation statistics have improved in timeliness with further estimation improvements underway.\n  - The pandemic-delayed census is in its final stages and results are expected by the end of the year.\n  - The statistics department remains understaffed and requires a sufficient budget and competitive pay to attract and retain high-skill staff."
    },
    {
      "heading": "Implementation risks and capacity constraints",
      "content": "- Capacity limitations in key areas—economic statistics and financial intelligence—are binding and require adequate resourcing.\n- Large-scale public investment could face supply constraints in the construction sector.\n- Refinancing choices for pandemic-era liquidity assistance materially affect debt dynamics and fiscal space.[1]"
    },
    {
      "heading": "Mission acknowledgements and timing",
      "content": "- The IMF mission conducted discussions during May 3-10, 2022.\n- Issues related to the Curaçao and Sint Maarten monetary union were further discussed in the mission to Curaçao and covered in that mission’s concluding statement.\n\nKingdom of the Netherlands – Sint Maarten: Staff Concluding Statement of the 2023 Article IV Consultations Mission, May 30, 2023.\n\n---\n\n\n References\n\n- Kingdom of the Netherlands-Sint Maarten and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2023/05/30/sint-maarten-staff-concluding-statement-of-2023-article-iv-consultations-mission"
    }
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    "Published: May 30, 2023",
    "Sint Maarten is experiencing strong recovery growth led by tourism and investment, but benefits of growth are slow to reach the rest of the economy.",
    "With narrowing fiscal and external deficits, the time is ripe to advance key fiscal and structural reforms, including medium-term investment planning and execution and streamlining business procedures.",
    "Capacity limitations exist in economic statistics and financial intelligence and require adequate resourcing.",
    "Output and growth",
    "Tourism dynamics",
    "External sector and inflation",
    "External support",
    "Recent fiscal performance and outlook",
    "Debt treatment scenarios",
    "Policy priorities",
    "Financial management and revenue administration",
    "Business environment and public services",
    "Financial Intelligence Unit (FIU) and AML/CFT",
    "Statistics and data capacity",
    "Capacity limitations in key areas—economic statistics and financial intelligence—are binding and require adequate resourcing.",
    "Large-scale public investment could face supply constraints in the construction sector.",
    "Refinancing choices for pandemic-era liquidity assistance materially affect debt dynamics and fiscal space.[1]",
    "The IMF mission conducted discussions during May 3-10, 2022.",
    "Issues related to the Curaçao and Sint Maarten monetary union were further discussed in the mission to Curaçao and covered in that mission’s concluding statement.",
    "[Kingdom of the Netherlands-Sint Maarten and the IMF](http://www.imf.org/external/country/SXM/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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