In 2009 signs of a recession were visible across Cayman’s key economic indicators and employment figures.
Data released in November by the Economics and Statistics Office showed 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 semi-annual report of economic indicators projected an overall shrinking of the Cayman economy by 5.8 per cent for the full year amidst ‘recessionary conditions in source markets’ that impact the domestic economy.
A year earlier in 2008 Cayman’s economy had still delivered modest growth of 1.1 per cent, compared to an average GDP of between 4.4 and 6.5 per cent in previous years.
The recession impacted all of Cayman’s industry sectors.
In the retail segment merchandise imports fell by 13 per cent revealing lower demand and sales volume.
The tourism industry experienced a 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 construction industry which on the whole is strongly influenced by tourism activity saw a decline in the total value of building permits of 17 per cent.
The financial services sector, which is highly dependent on mutual fund and company registrations, had to deal with a drop in mutual fund registrations.
In September 2009 the number of funds had gradually increased to 9,838 from its low of 9,705 in the first quarter. Although numbers are expected to have slowly picked up in the fourth quarter, they will still be down from a record 10,291 in 2008.
New company registrations declined by an unprecedented 46.2 per cent compared to figures for the first half year 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.
In the real estate market, property transfers fell by 21 per cent in number and 43.3 per cent in value.
All the negative development in the economy had a significant impact on the job market. Unemployment rates were forecast to increase for the third straight year, reaching 5.5 per cent in 2009, the highest unemployment rate in a decade.
Between November 2008 and November 2009 work permits and government contracts for non-Caymanian workers declined by 12.4 per cent or 3303 permits down from 26,659 permit holders.
In addition to the deteriorating global economy and its implications for the tourism and financial services industry, the reduction of the Caymanian labour force by several thousand workers in turn exacerbated the crisis for the local economy, as it significantly reduced the amount of money that was spent for example in the in the retail and real estate industry.
Government workers accounted for one of the largest drops in employment for foreign work permit holders in the Cayman Islands over the past year. The number of government contracts alone dropped by 10 per cent in 2009.
The largest reduction in the workforce took place in the construction industry, showing a decline of over 15 per cent.
The number of carpenters on permits fell from 923 to 773 in that time, heavy equipment operator permits went from 248 to 199, masons dropped from 629 to 545 and skilled and unskilled labourer permits went from 1,536 to 1,185.
The tourism and hospitality industry also saw employment numbers decline by more than 10 per cent.
In the financial services industry the number of accountants on work permits fell by more than 16 per cent, while professional managers declined by over 11 per cent.
While the immediate economic outlook is still gloomy, Cayman Islands Financial Secretary Ken Jefferson expects an economic recovery for the latter half of 2010.