The Cayman Islands is facing a double-digit drop in gross domestic product and an unemployment rate of almost 20% as a result of the coronavirus crisis, Finance Minister Roy McTaggart said Wednesday.
Government is also projecting a loss in revenues to the public purse of up to $250 million in 2020. A series of measures is being planned to limit the damage, including taking out a $500 million emergency credit line.
In the best-case scenario, with the domestic economy reopening fully by July and some tourists returning by October, McTaggart said Cayman’s GDP would contract by 11.4% and nearly 9,000 jobs would be displaced, based on data from the Economics and Statistics Office.
He said 2,772 of those jobs were projected to be held by Caymanians.
That projection is based on tourism returning at 20% of its normal level for the last quarter of the year.
If that doesn’t happen, McTaggart said the analysis showed a GDP drop of 12.2%, with nearly 10,000 jobs lost, including nearly 3,000 Caymanian employees.
“It is disheartening to share that with you but this is the stark reality,” he said.
McTaggart highlighted a range of measures that government is implementing, including loans to small businesses, that he believes could cut that impact to such an extent that the GDP drop could be cut to 7.3%, saving about 1,470 jobs, including around 680 Caymanian posts.
He said government’s finances, which were in a strong position, were taking a hammering.
Revenues in April were just $23 million, compared with expenses of $68 million. That $45 million difference is the biggest monthly deficit in Cayman’s history.
By the end of the year, government could be looking at a $250 million deficit as a result of lost revenue and increased spending to fight COVID-19.
“That is the kind of challenge that faces us as a country,” he said.
McTaggart said the Ministry of Finance would shortly put out a request for proposals for a $500 million standby line of credit. That will require approval from the Foreign and Commonwealth Office, but McTaggart said most countries around the world were taking similar measures.
He acknowledged it could take until 2022 to get Cayman’s economy back on track.
Though he described the credit line as a “security blanket”, he said government could run out of funds by the second quarter of 2021 without a major turnaround.
There are also expected to be impacts on the housing and rental market.
He also revealed government had spent $31.6 million on COVID-19-related measures so far, though almost $3 million of this was offset by community contributions to cover part of the costs of the COVID-19 test kits.
McTaggart said work was continuing on stimulus measures. He said a version of the National Community Enhancement (NiCE) work programme could be used to put unemployed people to work and put cash in their pockets, but that can only be considered once the domestic economy reopens.
An Economics Assessment and Stimulus Plan is currently being reviewed by Cabinet.
McTaggart said that included three main elements:
- Policies to leave money in the hands of impacted individuals, in other words, direct welfare payments;
- Policies to support small business, including loans at preferential rates;
- Post-crisis recovery policies to make funding available and reduce business costs.
He also added that government’s capital works programme, including the John Gray High School development, the roads network expansion and the Mental Health Facility in East End, would also help put people back to work.
“A tourism strategy is being developed for the resumption of visitor arrivals post-COVID-19,” he added.
“Reopening our borders to tourists is of paramount importance to government and the country as a whole but we will only do this when it is safe to do so.”