Finance minister spells out ‘stark reality’ of COVID economic impact

Government to seek bidders to provide $500M credit line

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.

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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.”

Read Finance Minister Roy McTaggart’s presentation here

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  1. The reality is that even if we opened up the airport and hotels tomorrow we would have few tourists.

    However there are many people who own second homes here who would be happy to return for a number of weeks if not months and spend money in our economy.

    Realistically someone who owns a condo on 7 mile beach won’t want to spend two weeks locked in a room at Comfort Suites. So we would need to test them before they get on a plane and make it possible for them to self isolate in their homes, with tags and cell phone tracking. Can this be done?

    As a vulnerable person I fully support this government’s determination to put people before profit. But yet we also read of a 7-fold increase in people visiting food banks. This is heart-breaking.

    Although we are in the same storm, we are not in the same boat.

    Government workers have not lost a penny from their paychecks and many have not needed to work at all. Contrast this with the plight of those who toiled in the tourism industry; Caymanians and expats. Most of them have not seen a paycheck in weeks. How can this island help them?

  2. I own a condo in Cayman and spend 4-5 months a year there. I have been sitting home since the middle of March when I had to leave because the airport was closing. When I come back to Cayman I am not going to sit in the Holiday Inn for 14 days. I will just not come back. What is that going to do to the economy. I scuba dive My wife and go to restaurants. We buy food My wife loves to shop and support the economy.. The island is going to have to find a way so people like me can return