Outlook for 2011-12

A two-seat majority will help the coalition government of the prime minister, Sarah Wescot-Williams, maintain political stability in the forecast period. The government will struggle to consolidate the fiscal accounts and continued weak economic growth will undermine its attempts at reform. The fiscal accounts are likely to remain in deficit throughout the outlook period. Any unpopular austerity measures will test the strength of the governing coalition. The government's accounts will remain under the supervision of the Dutch College Financieel Toezicht (CFT, the financial supervision council) in the forecast period. The Netherlands Antilles guilder will be replaced by the US dollar or the Dutch Caribbean guilder in 2012. Global weakening and attempts to tighten the fiscal policy stance will cause growth in St Maarten to slow again in 2011.

The political scene

The government's attempts to consolidate the fiscal accounts are proving problematic and have brought it into conflict with the civil service unions, with the administration deciding to pay in July an outstanding payment of cost of living adjustments dating back to 2006. The Dutch government, which has stated that it may intervene "if necessary", is monitoring the situation.

Economic policy

St Maarten has submitted another draft budget for 2011 to the CFT, which provides technical assistance to the authorities of St Maarten and Curaçao, after the previous draft was deemed to be based on unrealistic expectations. The authorities in St Maarten (and Curaçao) have continued to discuss the introduction of a new currency in 2012, including the possibility of adopting the US dollar as the monetary unit.

The domestic economy

Inflation for St Maarten decelerated to 0.8% in October 2010 (the latest available data), from 6% at the end of 2009. The easing of inflation is a result of weaker price pressures for clothing and footwear, health and education. The economy of the Netherlands Antilles Federation saw economic activity contract by 0.3% year on year in the second quarter of 2010, a deterioration compared to the first quarter, when output expanded by 0.8%.

Foreign trade and payments

The current-account deficit of the Federation widened further in the first nine months of 2010 owing to a sharp deterioration in the current transfers balance and a rise in the import bill.