GEORGE TOWN, Cayman Islands (CNS) – The Cayman Islands’ economy could contract by as much as 12.2 percent this year, according to finance and economic development minister Roy McTaggart. The gloomy forecast for the country’s short-term economic fortunes was not unexpected, but with the reality of a 19 percent unemployment rate, the government will now need to create public sector jobs and fund local small businesses until tourism is back on its feet.
“It is disheartening for me to relay such bad news,” the minister said last Wednesday. “Still, our government will continue to tell you the unvarnished truth, whether it be good or bad.”
McTaggart unveiled the broad parameters, though little detail, of the government’s much anticipated economic stimulus plan during the COVID-19 briefing. “The Cayman Islands economic assessment and stimulus plan” has been prepared by the economics and statistics office with input from across both the public and private sectors, McTaggart said.
The minister indicated that the post-COVID economy will be heavily dependent on construction. Several measures will be taken to streamline the project approval process for those waiting to get off the ground and more power will be given to the planning department to fast-track planning applications.
The minister said the government will be expediting its construction projects, such as the mental health unit, John Gray High School, and the enhancement of the roads.
But he said there was nothing in this new plan that will help ‘green’ the local economy by encouraging environmentally friendly projects through special inducements to counter what could be a period of excessive development as the government tries to fill the economic hole left by tourism.
Over the coming month’s government also plans to start a low-cost loan programme for small businesses, create public sector jobs and make further efforts to diversify the local economy, with a focus on agriculture for domestic food security.
As well as expanding NiCE, the bi-annual clean-up programme, the government will be creating work for local people directly with other community projects. However, the minister did not say how many jobs the government believes it can create to replace an estimated loss of almost 3,000 that were held by Caymanians in tourism alone.
McTaggart said the government will provide very low-cost loans as well as grants to save businesses. While speaking about soft funding of small businesses, he said that people would be given cash support to ensure no one goes without their basic needs and people keep spending in the economy.
The proposed economic stimulus plan will provide for those in need. But the government has no plan in this stimulus package to restructure fees and taxes to take more from those who will benefit from the post-COVID economy, as opposed to those who have been hit hardest.
The government has based the plan on a best-case scenario of reopening the local economy fully by the beginning of July 2020 than seeing a limited number of guests coming in October. In this scenario, Cayman is expected to suffer an 11.4 percent decline in GDP with the unemployment rate rising to 11.6 percent. But if visitors do not return before the end of the year as a result of international economic developments, unemployment is expected to reach almost 20 percent among Caymanians and the GDP to fall by as much as 12.2 percent.
But if the measures implemented to date and in this plan work government could boost the GDP by around $184.9 million decreasing the decline to around 7.3 percent. McTaggart said.
The only economic good news the minister had, at least for the man in the street and small businesses, is the expected significant decline in inflation. Before COVID-19 landed on Cayman’s shores, inflation was rampant, running at a whopping 5.7 percent, which was making it very hard for many people even in the economic boom. But with the economy imploding, inflation is expected to drop to 0.4 percent this year, McTaggart said.
He said the government would continue to evaluate and monitor the economy. “If other rounds of stimulus measures are needed, then we stand ready to do whatever is necessary to regain and maintain a strong economy,” McTaggart said.
“While the challenges are indeed enormous and may seem insurmountable, I would posit that our actions so far have left us in a strong position and well placed to eradicate COVID-19 from our community.”
The minister said Cayman had been safely navigating the single largest health disaster in a generation but the government was committed to charting the next steps in the journey as well.
“We, as the government, will continue to be prudent while seeking out the best ways to impact the lives of our citizens in the most positive ways,” McTaggart added.
The ESO report is expected to be available to the public by early [next] this week.