Panton: ‘Cayman’s economy is strong and getting stronger’

Premier Wayne Panton has told MPs this week that Cayman’s economy remains very strong, with more growth predicted over the coming years.

Panton, who is also Minister for Finance and Economic Development, gave a speech on the ‘State of the Economy’ in Parliament on Wednesday, 20 Sept.

He spoke of Cayman’s financial position and its prospects, and its impact on “our nation’s most precious commodity: our people”.

“I am proud to report that, as predicted, Cayman’s economy is strong and getting stronger; and we are steadily recovering from the devastation of the COVID-19 pandemic,” Panton said.

The hotel, restaurant, transport, storage and communication sectors all grew in 2022 and further improved in 2023, Parliament heard.

“International business is thriving. Shops are bustling and, for those that want them, jobs are available up and down the economic ladder,” Panton said.

Despite hardships experienced during the global pandemic, the finance, insurance and business services sectors have shown “remarkable resilience” and have continued to expand, he added.

Economy grows 3.8%

During his speech, the premier detailed the government’s current fiscal position, as well as the end-of-year financial forecasts.

Preliminary indicators suggest that the economy of the Cayman Islands expanded in real terms by 3.8% in 2022, a continuation of the recovery experienced since 2021, Panton said.

“The expansion reflected robust global demand for Cayman’s services and underpins our people’s hard work and dedication,” he added.

He went on to say that the indicators for the first quarter of this year show that the gross domestic product expanded by 3.4%.

Panton said the “robust performance” was down to strong recovery in hotels, restaurants and transport, storage and communication, while maintaining strength in other sectors.

In 2022, hotels and restaurants sector grew 23.2% over the prior year, with projected growth of 29.9% in 2023 and 17% in 2024, he said.

The premier said that during the COVID-19 pandemic, the government prioritised the lives of residents and sustainably reopened borders.

“Today I am proud and admittedly relieved to announce that we made the right decision. Not only was the loss of lives minimised, but the tourism industry has rebounded even stronger.”

For the first six months of 2023, more than 235,000 stayover tourists visited Cayman – over 80% of the total in the first six months of 2019, when there were record arrivals, he said.

The cruise business is also recovering well, he said, with more than 740,000 visitors by the end of June 2023.

The transport, storage and communication sector increased by 11.4%, and Cayman Airways has continued to expand and add new routes, Panton said.

Activity at Cayman’s major seaport has grown to near capacity, with merchandise imports rising by 17.4% in 2022 and supporting an expansion of wholesale and retail trade.

For the first half of 2023, merchandise imports grew 1.3% relative to the same period last year, Panton told Parliament.

“Having carefully navigated the critical recovery phase of the pandemic, our economy has emerged stronger,” he said.

He said he is expecting economic expansion over the next two years with the Economics and Statistics Office projecting overall economic growth of 3.1% in 2023 and 2.2% in 2024.

Further growth

The construction sector in 2022 expanded by 1%, and real estate grew by 4.8%, despite higher borrowing costs and higher input costs, Panton said.

He added that the finance and insurance sector has been a key driver in the success of Cayman’s economy and the prosperity enjoyed by Caymanians for several decades.

“It proved to be the engine of our fiscal revenue during the pandemic when borders were closed and international tourism suspended,” he said, adding government will continue to support it.

All conditions are in place for the removal of Cayman from the FATF grey list, which is a testament of commitment to the growth and health of financial services, Panton added.

The sector is projected to expand moderately by an average of 1.2% per year between 2023 and 2024.

The business services sector, comprised largely of legal and accounting services, also remained relatively robust during the crisis, the finance minister told Parliament.

The sector is projected to grow by 1.9% in 2023 and 2.1% in 2024, having expanded by 2.1% in 2022.

“Having spent most of my professional career in the legal and financial services industry, I am very conscious of the role these critical services play,” he said.

Population growth and unemployment

According to estimates from the ESO Labour Force Survey Spring 2023 Report, the total labour force increased by 7.9% in the past year to reach 58,669 people, as of June.

Meanwhile, the overall unemployment rate dropped to 2.4% in June, and is expected to average 2.5% between 2023 and 2024 – significantly down from 5.7% in 2021, Panton said.

The Caymanian unemployment rate fell to 3.7% of the labour force in June, compared to 5.1% for the same period in 2022 and as high as 8.5% in 2021, the finance minister added.

“I am especially heartened by the dip in Caymanian unemployment, showing that our people are benefitting from the economic growth and returning to the job market,” Panton said.

The government will continue to provide training and upskilling to Caymanians with the highest unemployment rate – those without high school level education and further training, he added.

According to the labour force survey, the mid-year population of the Cayman Islands was estimated to be 83,671, the premier said.

Within this total, the population of Caymanians was 38,926, or 46.5%.

The total population indicated in the report – that of 83,671 people – reflected a growth of 2.6% from the 81,546 estimated in the previous year.

He said the growth was led by the recovery of construction and tourism-related services and by the expansion of others, including financial services, tech, fintech and healthcare.

“Further, we know that people moved to our islands during the pandemic, choosing to work remotely from a base here in our safe, clean and beautiful islands,” he said.

Work permits increased from 26,321 in December 2021 to 36,372 in June 2023, the premier added.

This was due to demand for labour in the hotel and restaurant industry, he said, and in the construction, wholesale and retail trade, transport and storage, and financial services sectors.

The results of the spring labour force survey indicated that total employment rose to an estimated 57,266, of which 21,615, or 37.7%, were Caymanians, Panton told Parliament.

Caymanian employment increased from 19,494 in 2021 to 22,457 in June 2023.

“Over the near term, we expect labour demand to continue to track with the GDP growth forecasts,” Panton said during his speech.

Inflation

The rising cost of living in the Cayman Islands, especially for the most vulnerable, is one of the most concerning issues the government is grappling with, the premier said.

The Consumer Price Index for the first quarter of 2023 indicated average prices rose by 6.6%. However, in the most recent quarter, ending June, the inflation rate was 4.1%.

“This would seem to indicate a gradual levelling off in the inflation rate as we move through 2023,” Panton said.

Average inflation for all of 2023 is projected at 5.2%, as the impact of central bank actions and improvements in the international supply chain temper price pressures throughout the year.

For 2024, inflation is projected at 2.5%.

“Despite the slowdown in the pace of inflation, these increases remain well above comfort levels,” Panton told Parliament, adding that the government will work to ease these pressures.

He then provided an update on the government’s financial performance using year-to-date figures, which he said follow the same trend seen in the first half of the financial year.

Quality-of-life gap

Panton said the government believes there is a gap between the success of Cayman’s economy and the quality of life of Caymanian people.

“We sought to understand and shrink this divide at the very beginning of our term by taking steps to improve our data collection mechanisms, especially on issues that impact quality of life.”

He said the 2021 Census was key, and the results have informed the policies and programmes that execute the aims of the 2024-2026 Strategic Policy Statement.

“I’ve always believed – especially in smaller jurisdictions – timely, accurate, relevant data in sufficient detail helps to make government and government services better,” Panton said.

He added: “Data and information can help us forecast, plan and be better prepared.”

The premier said Cayman’s rapidly growing population has tangible consequences for the government’s ability to plan and prepare for the future.

But said it is working steadily to improve the roads and transportation network, alleviate the resulting traffic concerns and ensure that public service mechanisms such as health, education and safety are strengthened and expanded to meet these increasing demands.

“This is one of the key reasons why we need to be strategic, prudent and farsighted in our budget allocations going forward.

“As that is the only way to ensure that all Caymanians and residents continue to have a good quality of life within our shores.”

In closing, he said his overriding mission is to foster an economy that is private-sector driven, giving people access to opportunities that will allow them to develop their full potential.

“With the national economy growing stronger and stronger each day, we intend to continue to share this growth with Caymanians in the form of tangible, measurable results that add value to the kitchen tables and bank accounts of the people of this country.”