Prices up, the economy down

The Economics and Statistics Office have just released reports that analyse Cayman’s economic performance over 2020 and 2021. Their reports show that prices in 2021 rose by on average 3.3 per cent, while in 2020 Cayman’s economy declined after nine consecutive years of growth.

Following a decline in the first quarter of 2021 of 1.0 per cent, price increases crept into Cayman’s economy in the last three quarters of 2021: 0.2 per cent in the second quarter, followed by 6.4 per cent in the third quarter and 7.6 per cent for the last quarter.

The 3.3 percent overall average inflation rate in 2021 is reflected in all 12 divisions of the CPI, with the highest average inflation rates estimated for miscellaneous goods and services (5.0%), transport (4.4%), food and non-alcoholic beverages (3.8%), communication (3.7%), health (3.5%), clothing and footwear (3.9%), housing and utilities (2.9%), and restaurants and hotels (3.7%).

The transport division recorded the highest average price movement in the CPI basket (14.6%), mainly due to the 27.6 per cent increase in the cost of fuel, other services in respect of personal transport equipment, up by 15.8 per cent and purchase of motor vehicles, up by 12.3 per cent.

The index for housing and utilities moved up by 11.5 per cent in the fourth quarter of 2021. The main contributors to this increase were electricity rates went up by a huge 26.5 per cent, and water supply by 13.1 per cent. Additionally, actual rentals paid by tenants and imputed rentals for owner-occupiers increased by 5.1 per cent and 10.7 per cent.

2020 sees decline in economy

According to the recently released Cayman Islands’ System of National Accounts Report 2020,the Gross Domestic Product (GDP) estimate for 2020, which is based on data collected from businesses and other establishments in the Islands, shows that the local economy contracted by 5.7 per cent, reversing nine consecutive years of positive economic performance.

Cayman beats the UK in terms of domestic economic performance in 2020, whereby the UK saw a decline of 9.4%, Latin America & the Caribbean (-6.9%), and the Euro Area (-6.4%), but Cayman’s performance was worse than the declines for Canada (-5.2%), and the USA (-3.4%).

A clear indication of the economic impact closing Cayman’s borders to tourists has had, 14 of the 18 industries declined in 2020, led by hotel & restaurant services (-53.2%); transport & storage services (-42.3%); other services, which is dominated by diving & watersport activities (-24.6%); administrative & support services (-7.7%); and manufacturing services (-7.1%). The only industries to post positive performances in 2020 were professional, scientific & technical activities (comprising primarily of legal and accounting activities (7.0%)); human health & social work activities (6.3%); public administration and defence (3.6%); and financial and insurance services (1.0%).

The financial and insurance services industry continued its expansion in 2020, albeit at a reduced rate when compared to 2019. The industry grew by 1.0% in 2020 after increasing by 2.5% in 2019 and 2.4% in 2018.

More data released by the ESO, contained in the Cayman Islands’ Balance of Payments (BOP) and International Investment Position (IIP) Report 2020, shows the statistical summaries of the economic and financial transactions between residents of the Cayman Islands and the rest of the world. The statistics are generated from survey returns of local businesses and other organisations, as well as data provided by the Cayman Islands Monetary Authority.

The latest BOP statistics for 2020 shows that the total payments of residents to non-residents exceeded receipts, thus resulting in a current account deficit of $636.3 million, compared to the $539.0 recorded in 2019.

The Current Account deficit for 2020 is estimated to have widened by 18.0 percent to reach $636.3 million from the deficit of $539.0 million recorded in 2019. This primarily emanated from a significantly reduced services sub-account, with the net balance declining by $495.4 million. Additionally, the primary and secondary income account and the goods account all recorded improvements, registering a slight decline in the deficit. The goods accounts recorded a smaller decline of $517.6 million in 2020.

The IIP shows the value and composition of foreign assets and liabilities of residents at the end of the year. The latter represents the total investments of non-residents in the Cayman Islands.