In the international news recently, there was some talk about the economy, in particular that of the United States, having ‘bottomed out’ and that the road to economic recovery had begun.
The second quarter US stock market rally, even though it was a bit inconsistent, was encouraging. US housing starts jumped 17 per cent in May, giving another hopeful sign that the worst was over for that country.
The economic well-being in the US is vitally important to the Cayman Islands because a large majority of tourists and a big chunk of the business for the financial industry come from that country.
Although there are some good signs economic recovery has begun in the US, unfortunately this does not mean a recovery has begun in Cayman.
Historically, there has been some lag in between the time the US has entered a recession and the time the effects were felt here. Indeed, the US officially entered into recession in December 2007, and Cayman’s Economic and Statistics Office, in its Annual Economic Report, stated the Cayman Islands avoided slipping into recession all together in 2008.
However, the Statistics Office stated that Cayman was likely to do so this year.
Chances are that recession has already begun, now that the high tourist season is over. This means, for the Cayman Islands, the worst of the global economic slowdown is likely yet to come. It means that we’re facing a long, difficult summer and early fall and that the next high tourist season might not be great either.
It means that businesses are likely to fail; that some people will lose their jobs; that the population is likely to continue to contract.
It means the new government isn’t going to make everything all better with a snap of fingers. It means the process of economic recovery in Cayman might take a while, maybe more than a year.
It means that residents, businesses and government entities are going to have to tighten their spending belts and learn to get by on less.
It means discretionary spending will be limited, and restaurants, jewellery stores, car dealerships and the like face extremely difficult times ahead.
Small jurisdictions like the Cayman Islands, caught up in a raging river of economic crisis, are, for the most part, helpless against the strong currents. We can only ride out the storm the best we can, buoyed by the knowledge that economic trends are cyclical and that eventually the currents will bring us to more prosperous times.