Today’s Editorial January 18: Costs hurting economy

Based on the lavish spending reported by local business during the recent holiday season, it would stand to reason people have confidence the economy will improve in 2006.

Cayman residents, however, aren’t so sure.

The most recent Caymanian Compass online indicated nearly as many people think the economy will get much worse as those who think it will get much better.

Those that thought the economy was going to get much better did not offer any comment as to their reasoning.

On the other hand, those that thought the economy was going to get worse cited two specific reasons: the cost of living and a lessening population.

It is not certain the population is indeed lessening, although it appears the expatriate community is changing in its make-up, with more people on work permits in the construction industry than ever before.

The effects of the rising costs of living are more apparent. Anyone who shops, owns a home or an automobile, or operates a business here is quite cognizant of the higher costs since Hurricane Ivan.

The high cost of rental accommodations is particularly troublesome, and likely to hinder the economy this year if not stabilised. The reduction in rental rates predicted by the Government to occur in the last quarter of 2005 has not really happened, and rental rates remain a good deal higher than pre-Ivan.

Added to higher electricity costs, higher food costs and higher gasoline costs, it is increasingly difficult for those in lower earning brackets – and even some of those in medium earning brackets – to make ends meet.

The rich may be getting richer with all the added financial services industry business since Ivan, but the poor are getting poorer.

Caymanians caught in the cost of living crunch can only do their best to keep afloat. Expatriates in the same situation have another option.

For its economy to prosper, Cayman needs a healthy financial services industry, a healthy tourism industry, and population base large enough to support all of the country’s businesses.

If expatriates start to leave because it is too expensive to live here, the economy will suffer from the loss of their local spending.

Replacing them might be easier said than done. It is more difficult to attract foreign workers here these days, at least from the places Cayman has traditional recruited.

Until the cost of living issue is addressed, the state of the economy will continue to remain uncertain in the minds of the people here.