Signs of a recession were visible across Cayman’s key economic indicators in the first half of 2009, data released on Friday by the Economics and Statistics Office shows.
The semi-annual report of economic indicators stated that the Cayman Islands’ gross domestic product had contracted at an annualised rate of 7.1 per cent during the first six months of 2009.
The report projects an overall shrinking of the Cayman economy by 5.8 per cent for the full year 2009 amidst ‘recessionary conditions in source markets’ that impact the domestic economy.
Many of the indicators not only reveal the depressed state of the economy, but also underline the continued reduction of government revenue sources.
Merchandise imports fell by 13 per cent, work permits numbers dropped by 7.6 per cent and new company registrations declined by an unprecedented 46.2 per cent compared to figures for the first half year of 2008.
At 24,270 there were nearly 2,000 fewer work permit holders at the end of June 2009 compared to one year earlier.
The largest decline in work permit numbers affected the construction, financial services and tourism industry.
The difficult economic situation for the tourism industry was also reflected in the fall of air arrivals by 13.3 per cent and 6.1 per cent lower cruise passenger numbers than in the first half of 2008.
The stalling construction industry saw a decline in the total value of building permits of 17 per cent.
Mutual fund registrations fell by 2.1 per cent but recovered in comparison to the final quarter of 2008.
Bank and trust company registrations fell by 3.9 per cent while stock exchange listings contracted by 16.1 per cent. Only the number of insurance licenses increased, by 1.9 per cent.
Property transfers dropped by 21 per cent in number and 43.3 per cent in value, revealing a difficult business environment for the real estate industry and a significant fall of stamp duty revenue for the government.
In addition government revenue from customs duties, work permit fees, registration fees for companies, banks, mutual funds and trusts fell across the board and contributed to a fiscal deficit that widened to $80.8 million from $1.6 million one year earlier.
The year-on-year reduction of total government revenue by 13.7 per cent in the first six months of 2009 was exacerbated by an increase of total expenditure of 10.4 per cent during the same period.
At the same time the total outstanding debt of the central government increased to $420.5.
Overall government revenue sources have shown significant signs of erosion, even before the fee hikes and duty increases announced in the government’s budget potentially impact permit numbers, registration numbers and import volumes further.
Financial Secretary Kenneth Jefferson for example estimated, at the time the 2009/10 budget was presented, a 10 per cent reduction in company registrations for the budget year. If company registrations and work permit numbers continue their rapid decline, the effect would not only be felt by the economy as a whole, but also put into doubt the government’s budget and revenue forecasts.