Cayman’s economy is forecast to begin recovery in the latter half of 2010, according to a report presented to lawmakers last week.
Cayman Islands Financial Secretary Ken Jefferson told the Legislative Assembly that the country’s immediate outlook was not good. The current government budget is based on projections that gross domestic product would fall for the second year in a row.
Unemployment rates were also forecast to increase for the third straight year, topping out during the 2009/10 (current) budget year at 5.5 per cent. Inflation was expected to grow by an anaemic 0.6 per cent in the fiscal year.
Mr. Jefferson said Cayman’s economic situation was beginning to catch up with the troubles of its largest economic partner, the United States.
‘The Cayman Islands…has come face-to-face with what is being termed as the worst global recession of the century and these Islands are definitely feeling the effects,’ Mr. Jefferson said Friday. ‘For the 2009 calendar year, output growth in the United States is expected to decline by 2.6 per cent, while the United Kingdom and Euro-area economies are projected to contract by 4.2 and 4.6 per cent, respectively.’
However, toward the beginning of the next budget year — which starts 1 July, 2010 – some gradual economic betterment for Cayman was expected.
‘Economic growth…is projected to stage a rebound in the succeeding two financial years,’ he said.
For the 2010/11 budget, gross domestic product is anticipated to grow three per cent. In the following fiscal year, a much stronger growth of 6.5 per cent is expected.
Unemployment levels are estimated to follow along the same track. The overall 5.5 per cent unemployment forecast in Cayman for this year is the highest jobless rate Cayman has seen in the decade. However, by the 2010/11 budget that rate is predicted to fall to 3.8 per cent, and lower again in 2011/12 to three per cent.
Mr. Jefferson cautioned lawmakers against making bets on a speedy economic recovery.
‘In 2009, world output is projected to decline by 1.4 per cent, its steepest decline since the Second World War,’ he said.
Lawmakers sitting through what’s likely to be a particularly gruelling budget session this month will find themselves hitting the books again just a few months down the line.
Because of the anomaly caused by the May elections, the Legislative Assembly is now debating a spending plan in October rather than in May and June as would be customary.
A budget for the current 2009/10 year must be passed by 31 October or the government will run out of temporary spending authority and would either have to borrow more cash, spend reserves or simply shut down.
Less than a month after that October deadline, Leader of Government Business McKeeva Bush is due to deliver his policy address on the budget for the 2010/11 year.
Legislators will then return in April – about six months after the current year’s spending plan has been passed – to debate finances again.