Cayman Islands Economy Under Review

Caymannetnews

26 February 2001

This story is reproduced by kind permission of Caymannetnews at http://www.caymannetnews.com

There has been much debate in various sectors of the economy as to whether a general decline in business activities reported in key sectors, is a sign of more serious economic slide.

Cayman Net News spoke to various sources, including the Financial Secretary, Hon. George McCarthy and Dr. Elizabeth Parsan, Director for the Office of Economic, Research and Development, who indicated that the economy is now under review.

"Ideas are being put together and interpretations are being made in terms of looking at various sectors of the economy, but to come to the overall conclusion that the economy is on a slide or heading for a major recession is a bit premature," said Mr. McCarthy.

According to one financial analyst, Cayman seems to have two economies - domestic and offshore banking - and it now appears as if the domestic side is in a slump. Cayman Net News recently reported extensively on a decline in the Construction and Tourism sectors (Issue 60 and 57 respectively).

However, the Financial Secretary noted that the financial sector was in fact thriving. "Considering the significant growth the Cayman Islands experienced in 2000 in the Company Sector it is quite evident that the financial community is satisfied."

Referring to the impact of legislation to satisfy FATF counter money laundering regulations, he added: "The international financial community confidence has been reinforced because at the end of the day everyone is aware in terms of the likely impact these international initiatives will have. We are not seeing a slowdown, rather a consolidation," he explained.

Mr. McCarthy also noted that his office was aware that the United States Federal Reserve Chairman, Alan Greenspan, had predicted that there will be zero growth for the US economy this year, but he would not speculate "where the dominoes would fall in regards to Cayman's economy."

"We know that we are not going to have a robust growth in certain areas, but we have to be careful in coming to any conclusions about the economy," Mr. McCarthy stressed.

He said that Government is looking to see what will stimulate the local economy and what is available to support capital ventures. "A total of 8.5 million dollars has been supported by the way of two motions This will allow for spending until the Budget has been approved."

He pointed out that Government was trying to streamline expenses to be in line with revenue. "As demands against the Government continues to grow, obviously we have to look at the expenditure side of the budget very carefully because from1994 to the end of 2000 revenues has increased by 85 percent but the expenditure side (has increased by 100 percent. We will have to introduce appropriate measures to deal with that. I cannot say how this will be remedy," he said.

Information regarding retrenchment of staff in Government were denied by the Financial Secretary.

Local merchants report varying degrees of business activity.

"Business is not that bad, but it is not where it needs to be, said Mr. Philip Parsons, Manager for A.L. Thompson's Home Depot. "The business just has not been there. It could be after the Christmas blues, but we hope that it will be better."

Another entrepreneur who wished not to be identified said: "Cayman's domestic economy has reached its optimal state and I believe that it has been operating this way for the past three years. You can only fill a glass so much."

Yes the economy is slowing. I believe we should try to integrate the offshore sector more directly with the domestic sector," he suggested.

"Perhaps things are low due to the state of the United States' economy," he offered.

Cayman Net News has learnt that there have been several lay-offs in the construction industry.

"The delay of the Ritz-Carlton project put a hurting on us," said one contractor. Normally, I get a spin-off from major jobs such as the Ritz. Now it will be months before I could get my construction crew back together."

A realtor who requested anonymity commented: "Frankly the Ritz-Carlton will not be enough to keep our economy buoyant." When pressed for specifics, he questioned:"What's holding up the Dart project?"

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