Caymans Expect Limited Impact From US Downgrade
Thursday, September 01, 2011

Fallout for the Cayman Islands following the US downgrade by Standard and Poor’s to ‘AA’ appears to be minimal, according to the chairman of Cayman Finance, Richard Coles.

"We are currently monitoring the situation regarding the US downgrade," he said. "Thus far, however, it does not appear to have caused any major impact on the Cayman Islands industry, although obviously developments in the US financial markets will impact Cayman funds as is the case in all of the world’s financial centres."

Despite these potential issues, Coles said that past experiences should provide some comfort. “It should also be borne in mind that the Cayman Islands financial sector did not experience any significant fallout as a result of the global crisis and continues to operate in a very stable environment,” he says.

In July, the Annual Economic Report 2010 painted a positive picture of the future for the Cayman Islands as it recovers from the significant impact of the global economic downturn.

The report showed that the islands' GDP fell by 4% in 2010, an improvement on the 7% decline seen in 2009. This drop is attributable to issues in the construction, real estate and financial services industries.

The report showed that new company registrations and new partnerships rebounded in 2010 but at the same time mutual fund registrations fell along with stock exchange listings, insurance licenses and bank and trust licenses.

The Cayman Islands is expected to recover in 2011, and post growth of around 0.9%. A 'strong recovery' is expected in 2012, fuelled by stronger tourism and more robust performance in the financial services industry but this remains largely dependent on external factors.