The Cayman Islands economy grew faster than expected before the COVID-19 pandemic hit last year.
Revised economic data released by the Economics and Statistics Office in December shows that Cayman’s gross domestic product expanded by 3.8% in 2019 – the ninth consecutive year of positive economic performance and the second-highest recorded growth rate since 2007.
The initially forecast economic growth rate for the year was 3.2%.
Although the financial and insurance services industry continued to expand, growing by 2.6% in 2019 compared with 2.2% in 2018, the economic share of the financial sector shrunk for the seventh consecutive year.
The finance and insurance sector made up 30.4% of Cayman’s GDP at constant prices in 2019, almost 7 percentage points less than in 2007 when it accounted for 37.3% of Cayman’s economy.
The decline in banking is mostly responsible for the sharp fall. The contribution of monetary institutions to Cayman’s GDP alone has dropped from 19.4% in 2006 to 14% in 2019. This reflects the dramatic decline in the number of Cayman-based banks during that period from 291 to 125.
At the same time, the legal sector expanded its share of Cayman’s economic product from 4.6% in 2006 to 6.4% in 2019, while the accounting sector grew its share from 3% to 3.7%.
But even when the economic output of legal and accounting services is added, the economic share of financial services declined by 5 percentage points from 45.5% in 2007 to 40.5% in 2019.
Between 2018 and 2019 all three financial services sectors – finance and insurance, legal, and accounting services – contributed a marginally smaller share to Cayman’s GDP.
One reason for this development is that in recent years other industry sectors have outpaced the financial services industry in terms of economic growth rates.
The industries with the highest rates of expansion in 2019 were construction (10%), other services (9.3%), education (7.5%), hotels and restaurants (6.9%) and public administration (6.8%).
The categories used by the Economics and Statistics Office do not enable an aggregated GDP figure for the tourism sector, which is spread across various segments.
However, the collapse of tourism in 2020 will inevitably mean that both the financial services sector and the construction industry significantly increased their share of the economy last year.