OAG: Economy is performing well but cost of living is high

In the main, the performance is creditable and generally in keeping with expectations but there’s a real risk of falling behind if some key outstanding and new recommendations are not applied.

That about sums up the assessment of the Auditor General’s review of the Cayman Islands economy for the period 2018-2022 - which includes selected 2023 updates.

In the detailed report, Auditor General Sue Winspear, says, “I am pleased to note that the economy is performing well. It has done so consistently over the five years although some indicators were, unsurprisingly, affected by the COVID-19 pandemic.”

“However,” she cautions, “it is worth noting that the cost of living is high; something that Caymanians and residents will be aware of.”

According to the report, between 2018 and 2023, the Cayman Islands’ average real gross domestic product (GDP) growth rate was of 2.9 per cent was higher than that of advanced economies, the Bahamas and Bermuda, but lower than the Caribbean region as a whole.

“Our analysis shows that the Cayman Islands’ GDP per capita was relatively constant, ranging from about $70,000 to almost $75,000 between 2018 and 2022. This is consistently higher than that of the advanced economies, the Bahamas and the Caribbean but consistently lower than that of Bermuda.”

The report focuses on the four main sectors of the economy; financial services, business activities and administration, construction and real estate, and tourism which together account for most of Cayman’s economy - around 70 per cent. They are also provide the most jobs.

“Looking at the sectors individually, financial services is the largest contributor to the economy and construction and real estate is the biggest employer. Tourism is the second largest employer and the Government spent the most supporting this sector,” the report states.

CONCERNS

However, despite the comparatively strong economic performance, there are areas of concern which of left unattended could disrupt the trend of economic success.

The report highlights that there are risks to and challenges for the economy. For example, maintaining responsible financial management and potential economic shocks such as a global economic slowdown or another pandemic.

According to the Auditor General, it is unclear how well these risks have been identified, assessed and managed.

It observes that successive governments have set clear priorities for economic growth and diversification. However, it emphasises that there is no overarching economic development strategy or clear plans to diversify the economy.

“Despite the economy performing well, there are risks to and challenges for the economy. It is unclear if these risks and challenges had been identified, assessed and managed.” Auditor General Winspear notes.

But she observed that progress is being made in this area which “should significantly improve the way that Government monitors and manages risks, including economic risks.” 

“I am pleased that strategies exist for the financial services and tourism sectors. However, there is no overarching strategy, a strategy for the construction sector or a finalised National Development Plan to support the implementation of this government priority.” 

Ms. Winspear also notes that successive Governments have identified economic diversification as a priority. She said while some successes have been made in diversifying the economy, there are no plans on how to achieve this priority more widely.

Further pointing out existing risks and challenges for the economy, the Auditor General stressed the importance of maintaining responsible financial management and potential economic shocks such as a global economic slowdown or another pandemic.

It said it’s unclear how well these risks have been identified, assessed and managed.

POPULATION

Another point of concern is the population.

The report states that between 2018 and 2022, there was a high correlation between economic growth and population growth.

It shows that during this period, the population increased by 24 per cent, from just below 66,000 people to almost 82,000 people.

“The population has a direct impact on the demand for public services now and in the future. Failure to respond to these demands and expectations could adversely affect the economy. Therefore, the Government needs to plan better for population growth and how this may affect economic development.”

As noted by Auditor General Winspeare, “For example, an increase in population would result in more pressure on the roads network, waste management and internet connectivity. It would also increase the demand for places in public and private schools, affordable housing and healthcare.”