Cayman Islands’ economy is expected to contract by 7.2% in 2020
"The Cayman Islands’ economy is expected to contract by 7.2 per cent in 2020 before recovering partially by 6.4 per cent in 2021," projects Finance Minister, Roy McTaggart.
McTaggart, in his presentation at the Chamber of Commerce Virtual Economic Forum, suggested that these projections would have been worse, had government not gone to great lengths to contain the virus as it had.
"Without these measures, the projections presented today would be bleaker, and we need not look far across the sea to appreciate what could have been," he said.
The main driver of the 2020 contraction is of course the hospitality and restaurant sector, which is expected to suffer a decline of 74.6 per cent in 2020. Tourist Accommodation Charges alone were $14.8 million lower than budget.
The transport, storage and communication sector is projected to contract by 14.7 percent-- the second-largest decline for the year, despite a moderate growth in communication.
The most resilient sectors to the pandemic have been the financing and insurance sector which is projected to decline by a modest 3.8 per cent and the business services sector, comprised mainly of legal and accounting services, which is expected to decline by 1.7 per cent. Given workers' ability to work remotely and the use of online banking by customers, these sectors have been able to maintain some level of success.
On a positive note, the Minister indicated that "additional spending by the Government on health and other essential services is expected to boost economic activity in health and social services and other Government services. Additionally, with more individuals working remotely and resumed office activities, consumption of electricity and water is expected to remain robust for the year."
Other economic highlights:
Unemployment: The unemployment rate in 2020 is forecasted at 6.9% of the labour force, due to a fall-off in demand from the labour-intensive tourism sector among others. The unemployment rate in 2021 is projected at 5.1%.
Output: The contraction in output for 2020 is precipitated by reductions in economic output associated with recent restrictions and low demand for some of our services in the coming months. International demand for our services will be impacted by the continuing closure of our borders and expected contractions in the US and other advanced economies.
Inflation: the consumer price index (CPI) inflation rate is forecasted at 0.4% in 2020, lower than the high of 5.7% observed in 2019. Falling international commodity prices are expected to support stability in the consumer basket and relieve most inflationary concerns from policy decisions in the near term. Inflation in 2021 is projected at 1.6%.
In a May 27 press briefing the Minister of Finance indicated that "measures implemented to date by our government are expected to boost GDP value-added by approximately $184.9 million in 2020, an improvement on the GDP contraction from -11.4 per cent to -7.3 per cent. This translates to roughly 36.0 per cent of the projected falloff in real GDP. As a result of the measures implemented, more jobs will be saved, an estimated 1,468 jobs, of which 678 are likely to go to Caymanians."
The Finance Minister stressed that growth in the months and years to come would be driven by strong collaboration with the private sector.