CONFIDENCE IN CAYMAN’S ECONOMIC MANAGEMENT AND RESILIENCE

By Staff Writer

The Cayman Islands has maintained its high ratings across the main sectors of economic management, keeping it on par with other leading global economies including the United Kingdom and outperforming many of its regional and other international counterparts.

This is detailed in the latest independent analysis of the jurisdiction’s economic performance and outlook by Moody’s, the reputable international credit ratings agency.

Reporting in Parliament on the latest Moody’s findings, Hon. Minister of Finance Chris Saunders welcomed the conclusions but stressed that is important that Cayman maintains these standards and not become complacent.

KEY PERFORMING INDICATORS

“The latest evaluation from Moody’s reflects confidence in our country’s economic, fiscal and institutional strength. However, it also challenges us as responsible stakeholders to ensure that these accomplishments are maintained for the benefit of all Caymanians. Despite Caymans, high GDP per capita and fiscal strength, we cannot become complacent.”

The latest Moody’s report on the Cayman Islands ranks the jurisdiction very favourably on its economic management, performance and outlook with specific ratings based on its evaluation of the economic, institutional and fiscal performance of the Cayman Islands.

“Using a number of criteria, or positive ratings is a result of the following key drivers. One is a very high gross domestic product of GDP per capita, a comparatively low government debt burden, and consistent macroeconomic management.

Among the outstanding performance areas are government bonds issued in Cayman dollars and foreign currencies.

ECONOMIC STRENGTH

Assessing the economic strength of the Cayman Islands, the Moody’s report rated it as moderate.

According to Mr Saunders, this is balanced with our limitations as a small island economy that is highly dependent on financial and tourism-related services.

However, he said, Moody’s note that large-scale projects over the past five years have increased the economy’s diversification.

Cayman received another impressive W3 rating under the heading of institutional strength based on governance models, the quality of its institutions, and the predictability of its policies.

“Based on worldwide governance indicators compiled by the World Bank Group, Cayman is amongst the highest in the region for institutional strength and ranks in the top 30 percentile of all sovereigns rated by Moody’s, including highly developed countries. Moody’s credit our relationship with the United Kingdom for enhancing the stability of the government, while also highlighting our long history of policy consensus and a consistent macroeconomic approach,” Mr Saunders outlined.

FISCAL STRENGTH

With regard to fiscal strength, the current Moody’s report also awards top grades to Cayman, placing it just one notch short of the highest possible rating.

On that aspect, Finance Minister Saunders said: “The perceived strength of our government is underscored by a relatively low debt burden, coupled with our commitment to fiscal prudence. The affordable debt burden is also supported by a long history of pegging our currency to the US dollar, which significantly reduces the risk of exchange rate shocks.”

Moody’s is also confident that Cayman is in a strong position to withstand and cope with what are referred to as ‘event risks’ such as natural disasters which could negatively impact public finance and the economy.

The Cayman Islands in this area is actually rated ‘A’ by Moody’s,” Finance Minister Saunders stated.

“Despite our vulnerability to external shocks given our small open economy, Moody’s considered the inherent resilience of the local economy and the robustness of our institutions. Although hurricanes are a recurring trend given our geographical location, Moody’s noted that the relative wealth of the jurisdiction provides a strong buffer. It also recognises the Cayman Island’s stable political environment in the past and the likelihood of a destabilising event being very small because of the strong institutions and the UK government’s oversight.”

Mr Saunders added that Moody’s noted that long-term economic risks related to the competitiveness in the Cayman Islands to key industries of tourism and financial services could affect government finances.

BONDS

“Moody’s Investor Service report dated 7th October 2022 reaffirms the Cayman Islands W3 bond rating along with a stable outlook,” Mr Saunders reported on one key aspect of Moody’s review.

The W3 sovereign rating, Mr Saunders explained, remains in the top tier of the Moody’s ratings matrix and their government ratings is only three notches below the highest rating of triple-A (Aaa) bonds that are rated or judged to be of high quality and are subject to very low credit risks.

“Our rating of W3 places us on a similar rating to the following countries: Belgium, the Czech Republic, Hong Kong, the Isle of Man, Macau, Qatar, Taiwan and of course the mother country of the United Kingdom. Simply put the Cayman Islands have the same credit rating according to Moody’s as the United Kingdom for comparability,” Finance and Economic Development Min. Saunders said.

CONFIDENCE

According to Mr Saunders, who is the Deputy Premier and Finance and Economic Development Minister, the latest evaluation from Moody’s reflects confidence in Cayman’s economic, fiscal and institutional strength.

“However, it also challenges us as responsible stakeholders to ensure that these accomplishments are maintained for the benefit of all Caymanians. Despite Caymans, GDP per capita and fiscal restraint, we cannot become complacent. We must remain committed, ensuring that our debt burden remains very low and affordable, while constantly looking for opportunities and developments that can diversify and grow our economy for the benefit of all Caymanians.”