More than 10,000 jobs could be lost by the close of 2020 if the coronavirus lockdown extends to the end of May, according to an economic impact analysis of the crisis prepared for the Chamber of Commerce. That figure could rise above 14,000 if the curfews go on through June and July, the report warns.
At least 1,400 people were laid off between 13 March, when the cruise ship ban and social gathering restrictions came into effect, and 17 April, a survey of more than 300 businesses carried out by the Chamber and cited in the report indicates.
Many of those surveyed said they would have to let more employees go in the coming weeks and the analysis predicts an “acceleration” in lay-offs as the impacts of lockdown and border closures take their toll.
“The result shows that, together, the companies surveyed have already laid off 16% of their staff,” the report states.
“As local businesses come to grips with the challenges, the survey also indicates that the layoffs will accelerate with the lockdown period.”
The full economic impact report, commissioned by the Chamber and prepared by economic consultancy firm FTS, looked at different scenarios depending on how long business closures and curfews remain in place.
The country’s GDP is expected to decline by 15% under a two-month lockdown, ending in May, and as much as 22% under a four-month lockdown.
The total figure of jobs lost by the end of the year is expected to top 10,000 if curfews go to the end of May, and could exceed 14,000 if the lockdown extends through to the end of July, the report states.
Construction and tourism will be worst hit, with many businesses, particularly those that rely on cruise tourism, shedding workers already.
Several well-known and well-loved businesses, including Don Foster’s dive shop and Calico Jack’s beach bar, announced their closures this week.
More than 4,000 people working in the tourism industry will likely lose their jobs by the end of the year, according to the analysis.
The report concludes, “Depending on the lockdown period, results suggest that 10,712 to 14,048 jobs may be lost as a result of the pandemic.
“While the results are significant, they are not surprising, given the significant role that the international economy plays in the Cayman Islands and its susceptibility to external shocks such as COVID-19.”
Government and business sector partnership
Chamber president Woody Foster said the economic assessment was an “important first step” towards formulating a recovery plan for the country. Foster said the report had been shared with government.
He paid tribute to the measures Cayman’s leaders have taken to protect the islands from the threat of the coronavirus and said the business group looked forward to working in partnership with government to find safe and practical solutions for the economy.
“The Chamber is looking forward to working collaboratively with the government on a plan to be implemented when the government and its medical experts decide that some domestic economic activity may resume in the country,” Foster said in a press release accompanying the report.
Minister of Commerce Joey Hew endorsed those sentiments.
He said, “The government continues to place the safety and lives of everyone as the priority. At the same time, we are making significant efforts to ensure that the local economy can safely resume when the time is right and we look forward to working closely with the Chamber on this.”
Financial services sector faces impacts
The financial services sector is also expected to be impacted, though not on the same scale as construction and tourism. The only jobs considered safe are in public administration, education and healthcare.
The report suggests that there will be a split of work-permit holders and Caymanians made unemployed. In the ‘best case scenario’ of a two-month lockdown, approximately 5,088 non-Caymanian jobs and 5,624 Caymanian jobs could go by the end of 2020.
It also analyses salary data for the sectors likely to be most impacted, and warns that the poorest sections of society will be worst hit.
This could lead to a humanitarian crisis, with charities overloaded and the Needs Assessment Unit faced with a surge in demand.
Government has boosted support to the NAU and opened up access to grants and loans for small businesses, but this is unlikely to be enough.
“The challenges to the unemployed, given the estimated numbers and likely wage brackets, will very likely accelerate beyond the extent of the current relief,” the report states.
“The primary reason for this is that the hardest hit sectors are also the lowest paying on average, which presents a significant social challenge for the community.”
The departure of thousands of work-permit holders could offset some of the demand on the charitable sector and public purse. But the report warns that this will also take consumers out of the islands and hinder the recovery effort.
As more people leave, the ability of businesses to survive on the domestic economy will be reduced. The chances for tourism-based businesses to refocus on domestic clients will also be limited, the report warns.
“The country’s heavy reliance on imported labour means that external shocks which results in a loss of jobs can, through a domino effect, lead to a material negative impact on the domestic economy as many businesses rely on the labour force for their consumers,” the FTS report states.
It recommends that the private and public sector collaborate on an “action plan” addressing ways to empower the most vulnerable, and provide support and training to them.
It adds that a new economic structure will be needed for the post COVID-19 world.
That should involve, “an updated economic strategy that better prepares the country to deal with external shocks, diversify its economy, create a more substantive domestic economy, embrace technology and enhance local agriculture,” the report concludes.
Reasons for optimism
The Chamber also gave credit to the government for its timely response to the pandemic, saying it had put Cayman in a position where it could begin considering some form of economic resumption.
Foster added, “In some countries, the crisis and related fatalities are to such an extent that it’s difficult to begin planning for the next phase. We are hopeful that if everyone continues to abide by the shelter in place, hygiene and social distancing measures introduced by the Cayman Islands Government, we will be in a position to reopen the economy in a measured and safe fashion guided by the government and medical experts.”
Minister of Finance and Economic Development Roy McTaggart said government would work with the private sector on a plan for the economy.
“We are grateful for the efforts of the Chamber in its response to the pandemic,” he said. “A successful resumption of activity within the domestic economy will require a truly collaborative effort by all community stakeholders and we look forward to working jointly with the private sector on these initiatives moving forward.”