The government has shelved construction of two schools as part of its belt-tightening efforts.
Work on the Beulah Smith High School in West Bay and the George Town Primary School has been put on hold.
Other projects that have also been delayed are the expansion to four lanes of the Esterley Tibbetts Highway, the Bodden Town Emergency Response Centre, and the seawall at the Savannah Gully.
Leader of Government Business Kurt Tibbetts said projects that were already under way or for which contracts had been signed would continue.
These included the new Government Administration Building, Clifton Hunter High School in Frank Sound, the new John Gray High School, the annex to George Town Public Library and the boxing gym, as well as road works.
The news was announced in the annual Strategic Policy Statement on Wednesday.
Mr. Tibbetts said the government was also undertaking other cost-saving measures including a temporary freeze on hiring in the public sector and a mandated 6 per cent reduction in operational expenditures. The government will not begin work on any new capital projects in the coming year.
Mr. Tibbetts said damage caused to Cayman Brac and Little Cayman had also impacted on government spending.
‘Given the tight constraints under which Government is operating to cushion the impact of the global slowdown, Hurricane Paloma’s unwelcome visit has only served to compound the situation. It has introduced pressing needs which must be addressed but which were not anticipated or planned for. These needs will not be ignored,’ he said.
Referring to the postponement of work on the two schools, Mr. Tibbetts said: ‘Overall, while significant physical constraints will be imposed on our existing facilities as a result of the delays in construction of Beulah Smith and George Town Primary, the Department of Education is working to ensure it is able to delivery the critical components of the new secondary curriculum to all high school students.
‘It is expected that we will be able to complete Beulah Smith and George Town Primary in the medium term.’
Clearance work on Beulah Smith has already been undertaken, and the school had been due to open in 2010. McAlpine was awarded the $49,799,800 contract in August to construct the high school.
Work on redeveloping John Gray High School and constructing the new Clifton Hunter High School in Frank Sound are both under way by Tom Jones International.
Mr. Tibbetts defended the government’s decision to press ahead with major capital works projects in the light of the worsening economy, insisting that they benefited the country in the medium- to long-term. He said they also had short-term benefit of generating spin-off business for hardware stores and other suppliers and that construction workers employed on the projects spent their earnings on supermarkets, bars, restaurants and other businesses.
‘Ultimately, these projects are also contributing to economic growth as they will be captured in the calculation of our Gross Domestic Product.
‘Altogether they have had a positive impact in supporting growth of the economy this year. The fact that our economy is continuing to grow is made even more remarkable in the context of the recent revelation that the US economy has been in recession for the past year.’
Mr. Tibbetts stated that in the 2009-2010 fiscal year, it was forecast that the country would have a surplus of $28.2 million, up from the $20.1 million projected for the current fiscal year.
On presenting the policy statement, which outlines the government’s strategic outcomes on which the 2009-2010 budget will be prepared, Mr. Tibbetts said: ‘This presentation of the 2009-2010 Strategic Policy Statement takes place against the backdrop of a worrying downturn in the global economy. So deep and complex is the crisis that some experts are saying the world is facing a situation almost similar to the Great Depression of the 1930s.’
Despite such dire predictions, forecasts prepared by Cayman’s Economics and Statistics Office showed that gross domestic product would grow by 1.7 per cent in the coming 2009-10 financial year, and should accelerate to 2.5 per cent in 2010-11 and 2.4 per cent in 2011-12.
Financial Secretary Kenneth Jefferson said: ‘These growth prospects assume that the world economy, and in particular the economy of the USA, will recover from its current difficulties.’
He outlined the economic predictions for the coming three fiscal years. He said that the government’s consultations with the financial services industry suggestion that the volatility and uncertainty in the global market is not expected to start improving until late into the fiscal year of 2009-2010, which ends June 2010.
Cash reserves forecast for 2009-2010 to 2011-2012 are $116.1 million, $121.6 million and $124.1 million, Mr. Jefferson said.
Surpluses for the coming financial year are forecast to be $28.1 million, $29.6 million for 2010-2011 and $32 million for 2011-2012.
Mr. Jefferson revealed that the financial services industry had recorded growth throughout the first half of 2008, albeit at lower growth rates. Mutual funds increased by 11.9 per cent while insurance licences and stock market listings grew by 2.6 per cent and 17.9 per cent respectively.
However, he noted that banks and trusts licences declined by 2.4 per cent while new company registrations fell by 3.3 per cent.
In the tourism sector, the stay-over market grew by 9.3 per cent overall for the first six months of 2008, compared to the same period the previous year, but cruise arrivals fell by 11.1 per cent in 2007 and by 13.5 per cent in the first half of 2008.
‘Overall tourist arrivals went down by 8.7 per cent in 2007 and by 10.5 per cent in the first half of 2008. Consequently, tourism receipts dipped by 6.6 per cent in 2007 to reach $399.1 million,’ Mr. Jefferson said.
In the construction field, 2007 saw the number of building permits fall 15.5 percent from the previous year to 1,090, valued at $446.3 million – the value was up marginally by 0.1 per cent on 2006’s figure.
Building permits for the first half of 2008 fell by 2.9 per cent to 599, the total value of the permits fell to $211.5 million or 26.2 per cent lower than the first half of 2007.
The unemployment rate went up to 3.8 per cent in 2007 from 2.6 per cent in 2006. Unemployment for 209-2010 forecast to increase to 3.9 per cent.
For the first six months of 2008, average inflation was 4 per cent, due to increases in the prices of food, household equipment, transport and communication, housing, clothing, education and medical, personal goods and services, alcohol and tobacco, Mr. Jefferson said. The inflation forecast, based on forecasts for the US, is 2.7 per cent for 2009-2010 and 3 per cent for the following two years.