Late in 2009 Cayman’s business community braced itself for a difficult 2010. Many predicted first signs of positive economic growth only for the latter half of the New Year. Twelve months later it appears that, despite some positive signs, this forecast will have to be delayed by another twelve months. The Mood of the Boardroom survey of business leaders in the Cayman Islands shows only a slight improvement in business confidence and the assessment of the economy.
MICHAEL KLEIN
After a massive decline in economic performance in 2009 of 7 per cent, Cayman’s economy still found itself in the midst of a recession in 2010.
In 2009 five key sectors suffered substantial economic declines, including construction (-29.3 per cent), financial and insurance services (-14.4 per cent), wholesale and retail (-11.5 per cent), hotels and restaurants (-10.2 per cent) and transport and storage (-8.1 per cent).
For 2010 estimates are that Cayman’s GDP has shrunk by a further 4.1 per cent.
Stalling and slower than anticipated growth of the US economy during the second half of 2010 may also have impacted the economic performance in the Cayman Islands economy, which is closely linked to the US. However, the first half of 2010 saw some indications of economic recovery.
Financial services
New company registrations surged by 18.4 per cent in the first six months of 2010, after a massive decline of 33.7 per cent during the same period in 2009. The number of hedge funds also increased again to 9,594 (third quarter of 2010), overcoming a two and a half year low of 9,378 at the end of the first quarter 2010.
Media reports of an “exodus of funds” relocating from Cayman to Europe and Ireland in particular are “a myth”, according to Cayman Finance and others in the financial services industry. The Cayman Islands Monetary Authority could only confirm a total of four funds that re-domiciled to Europe from Cayman so far.
Tourism
The tourism sector also steadied following a tumultuous 2009. By October 2010 air arrivals had jumped 5.4 per cent and in November the 2010-formed Ministerial Council for Tourism revealed that Cayman Airways flights would be scheduled to link up with Europe-originating services on Virgin Atlantic through Havana, Miami and Jamaica, providing more options for travelers. Also in November West Jet launched a new direct service from Toronto to Cayman.
Hotel occupancy rates increased from 59 to 69.2 per cent on a room stock that remained flat year-on-year. Yet, while this is positive news, it most likely has been achieved on the basis of deeply discounted room rates.
The economic downturn still affected downtown businesses, with Senor Frog’s restaurant and bar closing permanently in May. A weather-impacted cruise season led to 68 lost or diverted cruises. Nevertheless cruise arrivals grew by 2 per cent year on year.
Real estate
The trend of a general economic decline combined with a population falling rapidly by 7.3 per cent in 2009 continued in 2010. As a result demand for rental properties slowed dramatically leading to lower rents and a large number of empty properties on the island. House prices dropped by 15 per cent in 2010 in response to slow demand, but the luxury property market held more firmly.
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