Lingering Downturn Impacts Cayman Finance Centre
Wednesday, October 05, 2011

The economy of the Cayman Islands has begun to recover from the economic downturn, posting positive growth for the first six months of 2011, compared to a contraction of 4.1% in 2010. The picture for the financial services industry remains mixed however.

On an annualized basis, economic growth during the first six months of the year amounted to 1.3%, but the economy is expected to lose momentum in the last two quarters and achieve growth of 0.9% for the entire 2011 calendar year.

Among the sectors, the performance of the hotel and restaurant industry stood out as it was estimated to have grown by 8%. This sector is mainly supported by the continuing strength of air arrivals.

Premier and Minster of Finance, McKeeva Bush stated: "The improved performance of the Cayman Islands' economy in the first six months points to a recovery that the government nurtured and fostered, and the islands' supportive private sector worked arduously to bring about the growth. It also demonstrates that we the government must continue to press ahead to ensure that the recovery strengthens and broadens to all economic sectors."

The Caymans' semi-annual economic report shows:

• Current work permits continued to fall but at a lower rate (-7.5%) compared to a year ago (-11.3%);
• Broad liquidity or money supply contracted by 11.6% due to reductions in foreign currency deposits held by residents;
• The weighted average lending rate fell by 12 basis points to 6.43% while prime lending rate remained stable at 3.25%;
• Domestic credit expanded by 2.7% as credit to the public sector increased by 55.4% while credit to the private sector fell by 2.3%;
• Bank and trust company licenses slid by 5.7% while insurance licenses also decreased by 4.4%;
• Mutual fund registrations fell as compared to the previous year by 77 or 0.8%;
• Stock exchange listings contracted by 18.1% to settle at 1,106 while stock market capitalization for mutual funds sharply declined;
• New company registrations rebounded by 11.0% to total 4,844;
• Air arrivals grew by 8.0% while cruise passengers declined by 3.4%;
• Building permits fell by 34.1% to settle at 362, valued at KYD99.5m (USD113.3m);
• The number of property transfers declined by 3.9% to 942 while the total value surged by 141.9% to KYD408.5m.