Cayman: Stimulus plan could improve GDP contraction from 11.4% to 7.3%
At the request of the Government, the Economics and Statistics Office prepared a report titled "The Cayman Islands Economic Assessment and Stimulus Plan".
This Plan focuses on the Islands' estimated macroeconomic performance in 2019, together with an assessment of policies announced and/ or implemented by the government in response to the COVID-19 pandemic to date. In addition, the report presents forecasts and assumptions for 2020 and recommends stimulus measures that could be adopted to incite economic recovery.
The plan was delivered by Roy McTaggart, Minister for Finance and Economic Development at today's coronavirus press briefing, who read as follows:
Included in the report is an extensive list of measures submitted by government ministries, private sector entities, and civil society for consideration. All of the measures submitted are included in the report that has been received by Cabinet for consideration.
The policy measures recommended are based on three broad categories: Firstly, government policies aimed at leaving money in the hands of affected individuals. Secondly, policies that support small business survival by buttressing their bottom line. Third, policies that assist in the post-crisis recovery by making funding readily available, streamlining approval processes, and reducing business cost, aimed at stimulating growth in the core business sectors. And finally, policies aimed at maintaining fiscal prudence while stimulating the entire economy.
Current measures implemented or in the process of being implemented
- COVID-19 support funding. To further support the efforts of the health sector, the government allocated $3.0 million from the disaster relief fund to finance the initial costs associated with COVID-19.
- Funding for vulnerable families. Increase staffing at the NAU to accommodate an expected increase in applications for assistance.
- A one-off payment of $425 to the disabled, seamen, veterans and persons already receiving personal financial assistance from the government.
- A one-off stipend of $600 paid to taxi drivers affected by the fall-out of cruise ship visitors.
- A one-time grant of $600 to Caymanian tourism workers affected by the shut-down.
- Expanding the NAU public assistance to allow work permit holders affected by the closure to apply for food voucher assistance.
- Pension withdrawal and pension payment holiday. Amended the pension law to allow persons to withdraw up to 100 per cent of their pension funds not exceeding $10,000, and 25 per cent of funds above $10,000. In addition, to the suspension of pension payments from 1st April to 30th September for employees and employers.
- Low-cost loan financing. A loan fund valued at $5.0 million was created and made available to micro and small businesses, which are 100 per cent Caymanian owned. The loans will be provided through the Cayman Islands Development Bank at an annual interest rate of 1.0 per cent after a six (6) months re-payment moratorium.
- Grant fund for small and micro business. A grant fund valued at $9.0 million was created and made available to small and micro business. Assistance to evaluate qualification and to apply for the grant is also being provided free of cost.
- Funding for technical assistance to Caymanian businesses. The government is providing funding of $500,000 for technical assistance to Caymanian owned businesses to assist with strategy and balance sheet planning. Similarly, funding of $200,000 is being provided for Caymanian owned businesses to receive training to assist them in planning and navigating this economic downturn.
- Waived accommodation taxes and TBL fees. Tourism accommodation taxes, trade and business licence fees for a short period, etc.
- Streamline the project approval process. To generate construction activity effectively after reopening the application and paperwork approvals should possibly be completed before reopening the economy, which will enable the projects to hit the ground running.
- Approved enhancements to the capacity of the Planning Department to monitor and expedite construction projects and applications. The construction sector creates the most demand across all other industries and hence generate the most output in the overall economy. The Planning department human capital will be beefed up to handle the increased demand for service
Economic assessment of measures announced and implemented to date.
The 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% to -7.3%. 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.
Other Stimulus Measures that are actively being pursued or under consideration
I want to thank the Deputy Governor, civil servants, the private sector and the general public for participating in the process of submitting policy suggestions and ensuring that we have an abundance of policy measures to consider. The ESO through the Deputy Governor received more than 50 suggestions after merging the similar ones.
I appreciate all suggestions, but in the interest of time, I cannot go through them all here today. However, these are the stimulus measures that are currently being acted on and developed by the government:
- A low-cost loan program for small businesses most affected by the closure of the tourism industry;
- Increase community employment programs (NiCE and others) post-COVID-19, using unemployed and displaced Caymanians;
- Expedited resumption of Government’s 2020/21 capital expenditure program, focusing initially on the resumption of construction projects that were in progress prior to the onset of Covid19. For example, this will include projects such as the Mental Health Facility in East End, enhancements to the road infrastructure by the NRA, and the John Gray High School.
- A tourism strategic plan is being developed by the Ministry of District Administration, Tourism and Transport, to cerograph the resumption of visitor arrivals post COVID-19. Tourism represents about 20% of the Cayman economy, so it should be abundantly clear to everyone that the reopening of our borders to the resumption of tourists is of paramount importance to the government and the success of the country. We will however only do this when it is safe to do so.
- Continue with efforts to diversify the local economy, with a focus on agriculture for domestic food security and resilience.
The Ministry of Finance continues to evaluate and continuously monitor the economy. If other rounds of stimulus measures are needed, then necessary measures will be taken to regain and maintain a strong economy for Cayman.