The Cayman Islands’ economy in 2008: An overview

Growth of economic activity in the Cayman Islands in 2008 continued on a downward trend as gross domestic product grew at an estimated rate of 1.1 per cent as compared to the 2.2 per cent posted in 2007.

The estimated mid-year population reached 55,998, growing by 3.5 per cent over the mid-year population in 2007. Growth in estimated nominal GDP was 5.3 per cent which increased GDP per capita to $40,253, 1.7 per cent above the level in 2007.

The modest growth in 2008 was supported on the demand side by growth in government consumption and demand for stay-over tourism services. Other demand indicators showed mixed performances: electricity consumption was up by 2.5 per cent while total consumer goods imports and water consumption fell by 2.8 per cent and 0.7 per cent respectively.  

In 2008, Cayman’s financial services industry exhibited the effects of the global economic crisis as all performance indicators weakened. Mutual funds and insurance continued to grow but at lower paces compared to 2007.  Downturns were recorded in stock exchange listings (-9.7 per cent), new companies registration (-16.7 per cent) while banks and trusts continued to fall, this time by 1.1 per cent.

Air arrivals to the Cayman Islands increased by 3.9 per cent in 2008, a moderation from the 9.0 per cent growth recorded in 2007.  Cruise arrivals fell by 9.5 per cent to reach 1.55 million passengers, which pulled down the total visitor arrivals to 1.86 million or a decline of 7.5 per cent relative to the previous year.

Construction recovered in 2008 to record positive growth. Although building permits reached 1,081 (or 0.8 per cent lower than in 2007) the total value of $502.3 million represents an improvement over a year ago by 12.5 per cent.  There were 534 certificates of occupancy valued at $222.6 million issued during the period, or 26.0 per cent above the previous year.  However, the total value of planning approvals moderated to $508.8 million.

After softening in 2007, real estate activity marginally improved in 2008 with the number of transferred freehold properties rising by 4.5 per cent to 2,289 valued at $558.1 million.

The average inflation rate in 2008 was 4.1 per cent, higher than the 2.9 per cent in 2007, due mainly to the recovery of the housing price index, specifically rentals and utilities.

Total labour force as of fall 2008 was estimated at 38,998, 4.2 per cent higher than in 2007. Total employment as a proportion of the working age population reached 80.8 per cent from 80.0 per cent in fall 2007. The unemployment rate (which is the percentage of unemployed persons in the labour force) rose to 4.0 per cent compared to 3.8 per cent in fall 2007.

Merchandise imports grew to $876.5 million from $860 million a year ago.  However, this was on account of the surge in the value of fuel imports by 27.2 per cent, while consumption goods, intermediate goods and capital goods contracted.

Total money supply (M2) stood at $5.6 billion (US$6.7 billion) in 2008, an increase of 2.8 per cent (or $153.4 million) compared to a year ago, as both narrow money (currency in circulation and demand deposits) and quasi money (savings deposits, fixed deposits and foreign currency deposits of residents) recorded modest increases.

Amidst the onset of the global financial crisis, net domestic credit from the commercial banks expanded by 22.4 per cent to reach $2.8 billion. The central government’s financing requirement pushed net credit to the public sector by 71.2 per cent while credit to the private sector rose by 17.9 per cent.

The net foreign asset position of local commercial banks fell by 6.7 per cent to $3.6 billion.  The reduction stemmed from the growth in foreign liabilities, which outpaced a smaller increase in foreign assets.

GDP growth projection for 2009 is placed at -1.4 per cent, given the recessionary conditions in the advanced economies, which are the predominant source markets of the Cayman Islands for tourism and financial services.  Inflation rate in 2009 is expected at 2.4 per cent arising from foreseen lower imported inflation and softer domestic demand.

Source:  Cayman Islands Annual Economic Report 2008, Economics and Statistics Office, Portfolio of Finance and Economics

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