SCOPE FOR GROWTH: CAYMAN 2023

At a time when most countries’ economic outlook for 2023 is cautious at best, the Cayman Islands could be forgiven for feeling at least a measure of optimism based on the projections coming out of the United States.

Despite the pressures on the global economy, the trend in the US seems headed for a marginal recession coming later in the year compared to the forecast for most other major powers, the UK included.

That lessens the anxiety of the likelihood of another severe economic downturn just when Cayman is cautiously emerging from the Covid pandemic-induced economic contraction of the past two years.

With countries trying to rebuild their shattered economies on the back of the pandemic other external impacts have been forcing governments to rethink their growth strategies. There is general agreement that the world will dip into recession this year at different rates, times and impacts for different countries.

Russia’s war in Ukraine and its disruptive effect on global supply chains, energy prices and self-imposed economic shocks caused by questionable government policies and Central Banks interventions with interest rate hikes to rebalance economies put at risk as was the case of the UK, all contributed to a growing dismal outlook for 2023.

That’s except for the US to a large degree where the economy remains stronger than many of its global counterparts, despite global and inward economic pressures.

It offers some respite for Cayman which is almost totally economically tethered to the US across all sectors of the local economy from business wholesale and retail operations, tourism, the finance sector, real estate, and construction to the small business sector and cottage industries. Cayman is not just dependent on the US but a veritable appendage of that global superpower.

But a storm of any sort in the US, whether political or economic, has repercussions for Cayman more so than developments in the mother country, the UK.

But there’s an inbuilt resilience in the Cayman economy that has enabled it to weather these ‘storms’ more adeptly than most of its neighbours.

We note the growth projections of Hon. Minister of Finance and Economic Development Chris Saunders when said in Parliament: “The domestic economy is expected to recover partly with a growth of 1.2 per cent in 2021. Economic activity is expected to accelerate further by 5.0 per cent in 2022 and an average of 3.2 per cent per year between 2023 and 2025.”

That forecast is heavily influenced by external factors, but despite the slower-than-expected recovery in the US, there are still signs that some key sectors, vital to Cayman from that key source market, are holding their own.

Beyond banking and finance which reflect global trends, the other key sector is tourism more noticeable because of its high visibility and almost immediate economic impact.

Stayover and cruise tourism - one literally grounded, the other metaphorically set adrift by the pandemic - have shown signs of rebounding with Cayman Airways expanding its reach, encouraging signs from hotel and restaurant bookings and cruise ship calls returning.

However, Cayman’s resilience is about to be tested as never before as it seeks to balance the competing demands of growth capacity and environmental sustainability while trying to ensure that Caymanians get a fair slice of the pie.

With the announced reduction in mega cruise ships calling at Cayman due to the lack of a cruise pier, the debate over the practicality of such infrastructure may have to be revisited this year - and certainly for the next election campaign due in 2025.

The dynamism of Hon. Minister of Tourism Kenneth Bryan that earned him 2022 Caribbean Tourism Minister of the Year will be in heavy demand to ‘bring home the bacon’ for Cayman in 2023.

At the same time, any increase in stayover visitors, though welcome, will mean a requirement for more hotel rooms - and if Cayman is reluctant to build ‘outwards’ due to space constraints, and issues of environmental sustainability championed by Hon. Premier Wayne Panton, it will have to face up to developers’ and tourism industry demands to build ‘upwards’.

The job market will also figure prominently in that discourse based on the PACT government’s commitment to “prioritize the integration of displaced Caymanians into the workforce, the unemployment rate is forecast at 5.0 per cent of the labour force in 2021, improving to 4.4 per cent in 2022 and averaging 3.6 per cent in the remaining three years.”

These are tough calls to be made but they can’t be avoided.

In fact, they are the very conversations and choices that other economies would love to have.