PHILIPSBURG--"Sustainable economic growth is key to achieving macroeconomic stability, reducing poverty, and creating broad-based well-being for the people of the young countries Curaçao and St. Maarten. However, the measures to attain these objectives should be aligned with the budgetary restrictions, be economically feasible, and have a lasting effect," Central Bank of Curaçao and St. Maarten President Emsley Tromp told Members of Parliament (MPs) Wednesday.
Tromp was at the time presenting the Central Bank's Annual Report for 2011 to MPs. He also gave a synopsis of accomplishments and financial bottlenecks the two countries and made recommendations for moving forward.
Poverty reduction can be achieved through "passive income support, such as government subsidies ... If the government chooses to provide subsidies or direct income support, it should have money in the budget to do so."
"The experiences in other countries in recent decades, show that active social policies help achieve lasting reductions in poverty. Such policies help people overcome obstacles to obtaining a job, including education, training, provision of childcare, and public transportation. In our case as well, these areas need to be addressed to reduce poverty in a lasting way."
MPs also questioned Tromp on the findings. Standing out was a query by Democratic Party MP Roy Marlin who was concerned about the tightening of regulations from the United States that would affect the off-shore financial sector of the Dutch Caribbean.
St. Maarten is looking into developing this sector further. Tromp said a regional response via the Caribbean Community Caricom was in the works.
Marlin suggested a taskforce comprising the central bank, government and other financial stakeholders be established to review legislation and other avenues needed to make this diversification of the economy happen. Tromp agreed with the suggestion. Marlin will pursue this with Finance Minister Roland Tuitt.
In his report Tromp said the Curaçao and St. Maarten governments have "yet to achieve the goal of a strong and stable environment to stimulate sustainable economic growth." Both countries have experienced "very moderate, if not negative GDP growth over the past few years."
Also the 2012 growth prospects of the two countries remain weak, due mainly to the gloomy economic outlook for main trading partners. "On numerous occasions, the Bank has indicated that improvement of the investment climate is crucial for both Curaçao and St. Maarten to achieve higher economic growth once the world economic climate starts to improve."
Focus on education
It is very important for the government to improve transparency and reduce red tape and the education system should provide graduates with skills currently needed in the labour market, he pointed out. "The recent decision by the Curaçao government to make education more accessible to everyone is commendable. However, it is worrisome that no attention seems to be given to the quality of education."
The rigidities in the labour market also need to be addressed to boost job creation. "The [Curaçao] government's recent decision to promulgate the so-called 80/20-rule, prescribing a minimum share of 80 per cent local workers for companies established in Curaçao, is not conducive to addressing those rigidities. An unfettered implementation of this rule may make our labour market less flexible and hence erode our competitive position."
Growth
The lack of data, in particular national accounts data and quarterly government statistics for the period 2009 – 2011, made an estimate of real GDP growth for St. Maarten in 2011 "rather tenuous." Based on the available indicators of private sector activity, St. Maarten's economy is estimated to have contracted by 1.5 per cent in 2011. The annual inflation rate accelerated from 2.3 per cent in 2010 to 4.6 per cent in 2011.
The increased inflationary pressures were driven largely by higher international oil and food prices and the increase in the turnover tax rate in February 2011.
The Curaçao economy has expanded by 0.4 per cent in 2011 after a growth of 0.1 per cent in 2010. In contrast to two of its main trading partners, i.e., the United States and The Netherlands where inflationary pressures rose because of increased international fuel and commodity prices, consumer price inflation eased in Curaçao in 2011. Curaçao registered an inflation rate of 2.3 per cent in 2011 compared to 2.8 per cent in 2010.
In St. Maarten, activities in the hotels and restaurants and wholesale and retail trade sectors declined, owing to a drop in stay-over tourism. The drop in the number of stay-over tourists was related to, among other things, a decline in time-share capacity and airlift during 2011. In contrast, cruise tourism expanded, but at a slower pace than in 2010.
The transport, storage and communication sector in St. Maarten showed mixed results, according to Tromp. The local harbour company performed well because more ships, in particular freighters, were piloted into the port. In line with the decline in stay-over tourism, passenger traffic at the airport dropped. Consequently, airport-related activities declined in 2011.
The utility sector also posted mixed results as the production of electricity declined, while that of water rose. In addition, both water and electricity consumption dropped. Meanwhile, the performance of the financial services sector was weak as reflected by a decline in net income of the domestic commercial banks.
Small surplus
Public sector figures indicate that St. Maarten has recorded "a small cash surplus of
NAf. 1.1 million" in 2011 as government revenues slightly surpassed expenditures. "This positive outcome was largely ascribable to a rise in turnover tax proceeds as a result of the increase in the turnover tax rate in 2011."
Revenues from other tax categories including wage tax, property tax, and excise on gasoline also rose. However, profit tax proceeds dropped in line with the slowdown in economic activities in St. Maarten during 2011.
With a tax-to-GDP ratio of 23 per cent, St. Maarten "still has some room" for broadening its revenue base, which should be attained primarily by improving the collection of taxes. In addition, improving the government's cost efficiency could contribute to maintaining a balanced budget.
Little room exists for further tax increases given the 2011 tax-to-GDP ratio of Curaçao of 26 per cent.
"As was made abundantly clear, the debt relief will lead to sustainable budgets only if it is complemented with policies aimed at structurally healthy public finances. Indeed, it did provide the governments of the two countries with a sound starting position but was not a solution for the many socioeconomic challenges these countries face," Tromp said.
One of these challenges is the aging of the population, which is putting an upward pressure on public spending on health care and the old age pension system (AOV), particularly in Curaçao.
Reforming the health care and old age pension systems "will require some unpopular measures," including augmenting efficiency in the provision of health care services and increasing the retirement age. Over the years, several studies have been conducted on these subjects and numerous recommendations made to the governments. "Regrettably, the much-needed reforms have not been implemented, thus aggravating the scope of the problems and their impact on the budget."
To maintain sustainable public finances and achieve macroeconomic stability, "these crucial reforms cannot be delayed any longer in the hopes of better times. Relying only on ad hoc measures which could have undesirable effects is not an option."
"Failing to act on all fronts ultimately will erode confidence and increase the risks to macroeconomic and financial stability. Ad hoc measures make structural or fiscal adjustments seem less urgent. In addition, monetary policy also may be constrained by this approach," the bank president said.
al-Qaida Credit cards Sepp Blatter China St Lucia TV ratings
No comments:
Post a Comment