Cayman Islands sees second consecutive year of growth
The Cayman Islands economy continued its recovery in 2012. Gross domestic product increased by 1.6 per cent, the strongest expansion since 2007, according to the latest estimates by the government’s Economics and Statistics Office.
In 2011, the economy had returned to growth after three years of contraction. This year, the economy is expected to expand by 2 per cent.
Finance Minister Marco Archer said, “I am pleased to note the second consecutive year of economic growth recorded for the Cayman Islands, which is attributed to increased activity in a number of sectors including hotels and restaurants, wholesale and retail trade, construction, transport, storage and communication, and financing and insurance services.”
A strong tourism sector and parts of the financial industry supported the economy. Construction activity increased for the first time in four years, expanding 6.7 per cent, more than any other sector of the economy, according to the Annual Economic Report for 2012.
Both air arrivals and the number of cruise visitors to the Cayman Islands were strong and rose by 4.1 per cent and 7.6 per cent, respectively. In total, more than 1.83 million tourists visited the islands in 2012. More stay-over tourists meant better results particularly for hotels and restaurants, which increased their growth by 3.3 per cent.
The financial services industry, in turn, continued to show a mixed performance. New partnership, insurance licences and stock exchange listings grew, while new company, bank, trust and mutual funds registrations declined. However, overall the largest sector of the Cayman Islands economy grew by 2 per cent.
Population growth also boosted the economic recovery, as the estimated mid-year population in 2012 of 56,125 was 1.5 per cent higher than in 2011. The wholesale and retail sector, which employs more people than any other industry in Cayman, expanded strongly by 3.5 per cent.
But not all sectors of the Cayman economy benefited from heightened activity. Real estate, renting and business services faltered and declined by 0.7 per cent. The value of planning approvals fell by a third and real estate activity abated, following a drop in the number and value of transferred properties.
Economic growth overall translated into higher total employment with 1,200 more employed people in 2012, 3.2 per cent more than a year earlier. As a result, the unemployment rate fell slightly to 6.2 per cent from 6.3 per cent in 2011.
Although the economy created jobs for Caymanians at a much faster rate than in previous years, the Caymanian unemployment rate continued to rise.
The Caymanian labour force expanded by more than 700 people. There were 525 more Caymanians in employment than a year earlier, but the number of unemployed Caymanians also rose by nearly 200. This resulted in an unemployment rate for Caymanians of 10.5 per cent; 0.7 per cent higher than 12 months earlier.
Positive signs in the economy and revenue growth, following a range of government fee increases, also supported government’s fiscal situation. Overall, the government budget remains in deficit, but central government’s fiscal deficit decreased to $27.6 million (1.1 per cent of GDP) in 2012, compared to $56.8 million, or 2.3 per cent of GDP, a year earlier.
It was the lowest deficit in six years.
“This was achieved by a combination of growth in revenue and a decline in overall spending,” Mr. Archer said.
Central government’s total outstanding debt decreased by 4.4 per cent to $586.2 million or 22.8 per cent of GDP last year.
The expected gross domestic product growth for 2013 of 2 per cent will depend on a continued recovery in stay-over tourism, greater activity from private sector construction projects and stability in financial services, the Economics and Statistics Office said.
Inflation is expected to rise by 2.1 per cent, due to a likely increase in international food prices.