New report paints rosier picture of economy

Cayman’s economy may be bigger than economists originally thought.

The Economics and Statistics Office released a report earlier this month that uses a different methodology for calculating the territory’s gross domestic product (GDP) – the monetary value of all goods and services produced within a given year – from 2006-2017.

The Economics and Statistics Office explained that the new methodology was used to put Cayman’s GDP calculations within international best standards. Often, this results in a downward adjustments to jurisdictions’ GDPs.

However, “In the case of Cayman, the rebasing and benchmarking exercise completed recently has led to significant improvements in the revised current and constant price GDP series,” the Economics and Statistics Office stated.

Under the new methodology, the Economics and Statistics Office calculated Cayman’s GDP to be about $3.9 billion in 2015, which is roughly 27.5 percent larger than the $3 billion estimate under the office’s old methodology. GDP per capita increased accordingly from about $52,000 to more than $66,000.

The growth rates through 2017 are 1.9 percent for the old GDP series and 1.5 percent for the rebased GDP series.

The reason the growth rates are lower under the new methodology is partly due to Cayman experiencing a larger recession from around 2008 through 2010. For instance, the old methodology calculated Cayman’s economy as contracting by 5.9 percent in 2009, but the new methodology calculates a 6.6 percent contraction.

One of the largest contributors to Cayman’s rosier economic picture is how the Economics and Statistics Office revised its calculations for financial intermediation services – the bringing together of depositors with borrowers who require funding.

Under the old methodology, the office determined the value of these intermediation services by calculating the spread between the interest charged on loans in relation to interest paid on deposits. Under the new methodology, the office determines the value of these services by using a more technical calculation, and also includes all loans and deposits – not just those made from intermediated funds, as was the case previously.

This new way of calculating the value of financial intermediary services increased the value of such services by 53 percent, which added more than $200 million to the revised GDP estimates.

Another major methodological change was how the Economics and Statistics Office treats work permits.

Under the old methodology, work permit fees were largely treated as “intermediate consumption” – goods and services that are used up by businesses in the production process – and therefore not included in Cayman’s GDP estimates. The new methodology has a much larger proportion of work permit fees being treated as taxes, which includes them in the GDP figures.

“Therefore, the conceptual adjustment in the treatment of business work permit fees has resulted in an increase in the level of GDP of CI$58.1 million or 6.9 percent of the total increase,” the Economics and Statistics Office stated.

Cayman is not the only jurisdiction that has a healthier economic outlook under the new way of calculating GDP.

“The increase in the rebased GDP series for the Cayman Islands is not unusual, as other countries which implemented recent rebasing and application of SNA 2008 showed the following increase in nominal GDP: Bahamas +27.6 percent in 2012 GDP; Nigeria +89.2 percent in 2013 GDP; Tanzania +27.8 percent in 2013 GDP; Maldives +19.5 percent in 2014 GDP; Zambia +25.2 percent in 2010 GDP; and Kenya +25.3 percent in 2013 GDP,” the office stated.

The Economics and Statistics Office’s efforts to recalculate Cayman’s GDP figures was a three-year project completed with the assistance of the Caribbean Technical Assistance Centre.

To read the full report, go to www.eso.ky.

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