Cayman’s “really strong” economic and fiscal position means it is the best-placed country in the Caribbean to respond meaningfully to the current crisis, according to economist Marla Dukharan.
Speaking at the virtual RF Investor Forum on Thursday, the economist – from Trinidad and Tobago, but based in Barbados – said, “Yes, they’re taking a hit, but they’re going to recover nicely.”
Although Cayman’s gross domestic product is estimated to contract by about 7.8%, forecasts show growth of 5.1% in 2021 and of 4.3% and 3.1% in subsequent years. Dukharan described these estimates by the Cayman Islands Economics and Statistics Office as “reasonable”.
Because of the impact that the shutdown and border closures had on the economy and especially tourism, she noted that Cayman has lost more than 7% of its population this year so far and that the unemployment rate is expected to double.
While this was not surprising, she said, Cayman’s government had the strongest fiscal position in the region to deal with the crisis. Nine years of consecutive economic growth up until this year ensured that Cayman has been able to accumulate CI$680 million in fiscal surpluses since 2012.
“So, they had the money to address this challenge,” Dukharan said.
At the same time, positive government budgets were used to reduce government debt to a rate below 10% of GDP, which is also the lowest in the region.
This leaves sufficient room to borrow, should it be necessary, she said, with regard to the line of credit the government has obtained with a syndicate of local banks.
Dukharan further noted that strong metrics across the board meant that despite the current crisis, credit ratings agency Moody’s had not changed its ‘stable’ ratings outlook for the Cayman Islands.
Cayman has maintained an Aa3 rating with a stable outlook from Moody’s since December 1997.
For the region, Dukharan pointed out that the pandemic only amplified and exacerbated pre-existing problems, particular in terms of productivity.
On top of that, Caribbean countries are highly tourism-dependent and in the current crisis jobs and government revenues in the sector are hit harder than in the rest of the world.
Although most of the growth predictions for the region look good on paper, she cautioned, that it is only a year-on-year change relative to the massive contraction countries are experiencing right now.
She predicts that most countries will not only take three years to return to the size they were in 2019 but will also have a different economic structure, in terms of growth drivers and where jobs are created.
For some, she said, “This is a really good thing and a long overdue thing, because as a matter of fact, our tourism-intensive economies have been losing productivity since the turn of this century.”