Cayman Economy Strengthens As Banking Assets Grow

by Phillip Morton, Investors Offshore.com

07 September 2007

Last year, the Cayman Islands maintained their international ranking of sixth place for total banking assets held by a jurisdiction, and growth of the economy outpaced that of the US, Financial Secretary Kenneth Jefferson has told lawmakers.

Jefferson reported to the Cayman Legislative Assembly that of the total global banking assets of US$29.4 trillion, Cayman held $1.7 trillion in 2006. The Cayman figure represents a growth of 37.2% during that year, while the global amount grew by 22.9%.

Meanwhile, the Cayman economy grew by 4.6%, outpacing its main trading partner, the US, where the growth was 3.2%.

Jefferson told the House of the Islands' continued good performance as he tabled the Cayman Islands Annual Economic Report 2006 late last week.

"Our economic growth was lower compared to 2005 but was significantly higher than the long-term average rate, while our inflation rate in 2006 was significantly lower than in 2005," he stated.

The Financial Secretary credited Cayman's 2006 growth to robust performance in the financial services sector, recovery of stay-over tourism, and continued expansion of the construction and utilities sectors.

He revealed that increases in the financial sector were seen in insurance company licences, mutual funds, company registrations, and stock exchange listings and capitalisation.

Jefferson pointed out that in its August 2006 report on the Cayman Islands, one of the two top international credit rating agencies, Moody's, gave the highest country ceiling for long-term and short-term foreign currency obligations, and short-term foreign currency deposits.

Moody's is an independent provider of economic information that international banking and other lending institutions use as one of their guides on whether they should conduct business with entities within a country, or with a government, and to what extent.

"The tourism sector staged a strong rebound in 2006 after the hurricane-induced setback in 2005. The rebound came mainly through the stay-over tourists, who comprise the higher spending segment of the market," Mr Jefferson explained.

In 2006, air arrivals jumped 59.3% over the previous year, moving to 267,257 visitors. With 1.9 million visitors last year, cruise visitor numbers moved up 7.3% over the previous year.

"The strong rebound in the stay-over market boosted total tourist expenditure in 2006 to $427.4 million, an increase of 44.1% from 2005," Jefferson stated.

He added that construction of additional housing units contributed to stabilisation of housing rentals and softening of the inflation rate.

Demand for electricity rose by 14.9%, and water consumption increased by 19.9%.

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