Minister of Finance Roy McTaggart said the latest government credit rating of the Cayman Islands reflected “confidence in our country’s economic, fiscal and institutional strengths,” when he presented the assessment by rating agency Moody’s in the Legislative Assembly last week.
Moody’s reaffirmed the Cayman Islands’ Aa3 government bond rating in April.
The rating, which applies to all bonds issued by the government, regardless of the currency, remains in the top tier of Moody’s rating matrix, three notches below the highest possible rating.
In its annual credit analysis, Moody’s noted that even though Cayman’s economy continues to be highly dependent on financial services and tourism, “the potential cruise terminal project and Cayman Enterprise and Health Cities could boost growth and help diversify the economic base in the medium to long term.”
Summarizing the report’s finding, Mr. McTaggart said the positive rating was the result of Cayman’s high gross domestic product per capita, a robust institutional framework and a comparatively low government debt burden.
Moody’s found that Cayman is wealthier and growing faster than other countries with the same credit rating but warned that the economy will slow marginally as large construction projects near completion.
Nevertheless, the rating agency expects tourism projects and infrastructure investments to continue to support the economy.
The rating report highlighted specifically the expansion of the Owen Roberts International Airport, the residences of Health City Cayman Islands, the construction of the 350-room Grand Hyatt Hotel and Residences, and a new cruise terminal in George Town.
Despite Cayman’s susceptibility to hurricanes, the overall risk profile is low, according to Moody’s, as a result of a strong institutional framework, fiscal oversight by the U.K. and low political risk.
The relative wealth of Cayman provides a strong buffer against weather-related shocks as evidenced by Hurricane Ivan in 2004, the report said.
Even though the storm inflicted damage equivalent to 200 percent of GDP, the country was able to recover quickly.
However, long-term economic risks from the loss of competitiveness in tourism or financial services could affect government finances, the rating agency noted.
While the rating remains positive, Minister McTaggart said, “it also challenges us as responsible stakeholders to ensure that these accomplishments are maintained for the benefit of all Caymanians.”
Despite Cayman’s high GDP per capita and fiscal strength, “we cannot become complacent,” he said.
“We must remain committed to ensuring that our debt burden remains very low while constantly looking for opportunities and developments that can diversify and grow our economy.”