Cayman's Outlook

Here is a detailed overview of Cayman's 2021 outlook.

Cayman’s Economic Outlook for 2021

Cayman is a wonderful place to live right now - everyone can come and go (around and between the three islands), no one has to wear a mask (other than on a public bus), and people can gather, socialize, go out to dinner and generally free free and safe. However, due to the global pandemic, 2021 is likely to be a challenging year, especially for those in the cruise ship and tourism industry, and for those parents with children in boarding school and university as traveling back and forth is still very difficult. However, because of the Cayman Islands Government’s swift and continual management of local COVID-19 cases, the hope is that the population will continue to be coronavirus free, enabling residents to live normally with minimal threat of country-wide lockdowns. With the introduction of the Global Citizen Certificate, which encourages qualifying individuals and families to move to Cayman with minimal red tape, the Government is proactively looking at ways to bolster the local economy in the knowledge that the tourism sector has been significantly impacted. Over time, as vaccines and other technologies become available (roll-out of the vaccine started during the first week of January 2021), we expect the borders to be further opened to people looking to enjoy everything that our Islands have to offer. Due to the country’s strong fiscal polices over the last 10 years, Cayman is financially the most robust out of all the Caribbean countries, and combined with its strong financial services sector, is positioned to weather the coronavirus storm better than the vast majority of other tourism dependent countries.

The Premier, Alden McLaughlin, announced in early January 2021 that they anticipate being able to open Cayman's borders to stay-over tourists by the end of March. By then they anticipate that the vast majority of vulnerable and at risk residents will have been vaccinated and in time herd immunity will develop. For all those interested in coming to Cayman once the borders reopen you must have had a full (two doses) of the Covid-19 vaccine and be able to show a record of this along with a negative Covid test taken within 72 hours of traveling. You will then be tested on arrival, day 5, day 10 and day 15 if you have not already left by then.

Looking back on 2020, the population, and the Government, have dealt with more than their fair share of challenges: in the early part of the year there were two enormous fires at the George Town Landfill, a 7.7 magnitude earthquake which came with a frightening tsunami warning, then came COVID-19, a strict lockdown and the shuttering of Cayman’s tourism industry. It is estimated that almost 3,000 workers have lost their jobs and approximately 4,500 overseas workers have left Cayman due to redundancy. Monthly stipends of $1,000 have been given to furloughed or unemployed Caymanians and charities are still providing supermarket vouchers to those struggling to feed their families. A mandatory 14 day quarantine is still in place for anyone entering the Islands and people have to apply to TravelCayman to gain permission to enter the country. Government revenues went from $353 million in the first three months of 2020 to $23 million in April, while expenses climbed to $68 million. Despite the dramatic drop in Government revenues, the debt rating agency Moody’s has maintained Cayman’s AA3 rating in April 2020, citing Cayman’s ‘prudent government planning’ that has left us with the fiscal space to deal with the economic impact of the pandemic.

On the conservation front, researchers confirmed that 675 turtle nests were counted between April and December 2019, and it was the longest recorded turtle nesting season in the Cayman Islands. In February, Environment Minister Dwayne Seymour announced a plan to ban certain single use plastics by January 1st 2021. These include polystyrene, plastic straws, plastic shopping bags and stirrers. We are waiting to hear an updated announcement on this. Then in October 2020, the Government and the Dart-led Consortium signed a long-awaited agreement to remediate and cap the exiting landfill and build a new solid waste management system.

Inflation is expected to drop by 0.4%, and the economy to decrease by 7.2% in 2020, while the restaurant and hospitality sectors have suffered an estimated 74.6% decline. Despite these negative signs, registrations of new companies are on the rise, with The Trade and Business Licensing Board having issued over 4,000 licences in 2020.
Efforts to alleviate traffic congestion through major roadworks continues. The NRA are planning to extend the three lanes on the first leg of the East-West Arterial Highway all the way down to the Grand Harbour roundabout. To reduce traffic at the busiest Butterfield roundabout, an airport connector road will be built to link the Cayman International School (CIS) roundabout to Sparky’s Drive. Sparky’s Drive will then be extended to Airport Road by the George Town Yacht Club to ease the heavy traffic seen on a daily basis.

Cayman continues to gear up for the general elections on May 26th 2021. The current voters’ register contains 21,824 individuals eligible to vote in District Elections. The elections will allow for the welcoming of a new Premier, as Alden McLaughlin Jr. is coming towards the e

Pre-Covid-19

In the months leading up to the Covid-19 crisis, Cayman’s economy was thriving. In 2019, the economy grew by 3%, unemployment was at 3.5% and inflation was running at 5.7%. The trend continued for the first three months of 2020, and government revenues were equally strong. Then, in April, the pandemic reached Cayman and life as we knew it screeched to a halt.

Impact of Covid-19

The IMF predicts that the economy of the Caribbean and Latin America region will contract by 5.2% on average, with individual Caribbean countries’ economies shrinking by anything from 5.6% to 13.7%.

For Cayman - assuming local restrictions are lifted by July and some businesses can resume operations - predictions are that the GDP will fall by between 11.4% and 12.2% this year, and unemployment will rise to around 19%.

However, the tourism industry, which accounts for 20% of the Cayman Islands GDP, has been effectively frozen since the Covid crisis began and will remain so until at least early 2021. Exactly when visitors will be welcomed back will depend on the vaccine take up and international developments but the later tourism resumes, the more jobs will be lost and the more the GDP will fall.

The government’s fiscal performance has also suffered: in the first three months of 2020, Government revenues were $353 million, but in April that figure plummeted to $23 million, whilst expenses climbed to $68 million. In one month the deficit hit $45 million.

Unfortunately, there is still a long road ahead. Over the course of the year, it is estimated that Government revenues could decline by between $211 and $227 million, or 24% to 26%, and at the same time spending in order to manage the crisis will rise. As a result, Government is establishing a $500 million standby line of credit, that can be drawn down in the event that cash resources are exhausted.

Stimulus Measures

A number of stimulus measures, designed to boost GDP and avoid the worst predictions from becoming reality, have already been enacted, with more in progress. The government has welcomed suggestions from ministries, private sector entities and the general public as to steps that can be taken to help protect vulnerable citizens, support small businesses, and stimulate the core business sectors.

Stimulus measures in place or in progress as of September 2020 include:

• $3 million from the disaster relief fund allocated to finance initial COVID-19 related costs.
• The Micro and Small Business Grant Programme: providing initial assistance of $1,000 monthly to selected business.
• Providing working capital assistance to small businesses with domestic markets that are recoverable.
• Working to re-purpose businesses with large tourist markets to transition into a larger domestic market.
• Partnering with banks and credit unions to grant soft loans between $15,000 and $75,000 to small tourism-related businesses; principal repayments deferred to 6 months and loan repayment extended up to 15 years.
• Financial assistance for displaced ex-patriates.
• Civil Servants returning to the workplace: using Flexible Work Policies to allow staff to apply for Remote Working and Flexible Work hours, where applicable.
• Small, vulnerable tourism businesses may be granted $3,000 monthly for a six-month period.
• A variety of one-off payments through NAU to vulnerable individuals.
• Allowing people to withdraw cash from their pension funds, and the suspension of pension payments for 15 months (1^st April 2020 to 30^th June 2021).
• $5 million fund established to provide low cost loans for small businesses.
• $9 million fund created for grants for small businesses.
• Funding of $500,000 to provide technical assistance and training for Caymanian-owned businesses.
• Streamlining construction approval processes.
• Building the capacity of the Planning Department to expedite construction projects.
• 2020-2021 Core Government capital investment budget will provide $154.6 million in 2020 and $96.5 million in 2021 for construction projects, such as development of the John Gray High School campus, enhanced infrastructure, capping and remediating the George Town Landfill, renovating court facilities and more.

These measures are expected to add approximately $185 million to the GDP in 2020, and therefore reduce the rate of contraction from 11.4% to 7.3%. It is also hoped these measures will save an estimated 1468 jobs.

A number of additional stimulus measures are currently being considered. These include:

• Increase community employment programme: The National Community Enhancement project (NiCE) may be expanded to help unemployed Caymanians.
• Plans to help non-Caymanian tourism displaced workers by repatriating them back to their country of origin (wherever possible).
• Expediting the Government’s capital expenditure programme, in particular construction and infrastructure projects.
• Develop a strategic plan to safely reopen the islands to tourists.
• Diversification of the local economy, with a focus on agriculture, such as increasing greenhouse purchase, irrigation, and boosting local eggs production funding.
• Increasing the National Minimum Wage by December 2020.
• Allowing businesses to cancel work permits when they are ready to rehire.
• Negotiation of rent reduction agreements amongst large commercial landlords.
• Wave or reduce rubbish collection fees for the remainder of 2020.

Inflation to Fall

Alongside this, a number of factors, including lower oil prices, less demand for non-food goods, a reduction in the demand for rental properties (due both to expat workers departing and to lack of visitors) are expected to see inflation to fall from last year’s 5.7% to 0.4%.

Whilst the outlook is far more somber than in previous years, it is perhaps reassuring to note that, in the midst of this global economic crisis, the debt rating agency Moody’s maintained Cayman’s AA3 rating in April this year, citing its 'prudent government planning' that has left it with the fiscal space to deal with the economic impact of the pandemic.

Conservation Efforts - Positive and Negative

2020 started with good news on the conservation front: efforts in Little Cayman to protect the critically endangered Nassau grouper were highlighted in an academic report published in January. The Grouper Moon Project which has been an ongoing joint effort between the Cayman Islands Department of Environment and US-based scientists has proven that the implementation of deliberate science-based conservation strategies can reverse significant declines. As one of the scientists on the project said, “Little Cayman is now home to the largest remaining identified Nassau grouper aggregation anywhere in the world." Local Cayman fishermen have been commended for adhering to the rules about not taking grouper from spawning sites, and a complete ban on fishing and diving in the area remains in place. Other wonderful conservation news includes researchers confirming that 675 turtle nests where counted between April and December 2019, making it the longest ever recorded turtle nesting season in the Cayman Islands. 468 nests were recorded in Grand Cayman (342 green turtle and 125 loggerhead and one hawksbill), 154 turtle tests were recorded in Little Cayman (86 green turtle, 65 loggerhead and 3 hawksbill) and in Cayman Brac the total was 53 (48 were loggerhead, 5 were green turtle and there were no hawksbill). The Department of Environment are waiting for the implementation of their Turtle Conservation Plan which is currently in the hands of Cabinet awaiting approval. The plan is incredibly important in the managing of artificial light in critical nesting habitat, reducing poaching and banning vehicles on beaches. Although the lengthy nesting season and good nesting numbers are very positive, wild turtles are still very much endangered.

Then in mid-January a developer, John Burke, was caught clearing mangrove forest and woodland from a four-acre site in West Bay. The Department of Environment have for years been raising issues of people clearing land after submitting an application for planning but not waiting for approval. Children in Cayman are taught the importance of our mangrove wetlands for hurricane protection and the survival of our very important flora and fauna, and the public are becoming increasingly demanding of consequences to such actions.

In February the Single-Use Plastic (SUP) Stakeholder Committee, headed up by Environment Minister Dwayne Seymour, was set up in Cayman with the plan to ban certain single use plastics on New Year's Day 2021. Things to be banned include polystyrene take-out containers, plastic straws, plastic check-out shopping bags, stirrers and cotton swabs. A growing number of retailers have already switched to eco-friendly alternatives, but without a commercial composting facility, which Cayman currently does not have, it is commonly agreed that all corn-based alternatives are worse than recyclable plastic 1 and 2. Alternatives to this need to be found. Cayman has still got a long way to go in its handling of our massive waste-management problems, but in the face of so many other countries, particularly those in the Caribbean, doing something about single use plastics, it was imperative that Cayman was seen to be doing something.

In May residents were reassured that the stingrays at Stingray City/Sandbar are being looked after. Staff at the Department of Environment visit the stingrays twice a day at 10am and 1pm, feeding them between 5lbs and 20lbs of food, dependent on the numbers, and give them some human interaction. Researchers have also joined the DoE staff to count the number of rays (up to 26) and check on them. Visiting the stingrays is Cayman's most important tourism attraction and making sure it is still there when visitors are eventually allowed back is every important to the Cayman Islands.

Fire at the Cayman Islands Landfill

Later in the month, on January 24th 2020 an even greater problem for Grand Cayman was unfolding. A significant fire broke out at the dump and the plume of smoke became so acrid and thick that Cayman International School next door was closed. Later in the day the Esterley Tibbetts highway between the Butterfield roundabout and the Camana Bay roundabout were closed as well, causing traffic chaos. Properties opposite the dump were evacuated and homes and businesses in George Town were affected.

The fire was contained by the afternoon of Sunday 26th January but many residents of Lakeside Apartments chose not to return to their residences until later in the week as the smell from the fire was still unbearable. Numerous questions have been raised as to why a country as sophisticated as Cayman lags so far behind other nations when it comes to recycling, single use plastic policies and general waste management techniques.

The dump fire then reignited on March 8th, its caustic black smoke forcing another closure of Cayman International School and other Georgie Town schools. Winds that day were in excess of 28mph making fighting the fire particularly hazardous. It took until March 11th for firefighters to have the fire under control but thick smoke was still billowing across parts of George Town and Seven Mile Beach.

Cayman's Earthquake

On Tuesday January 28th 2020 at about 2.10pm a 7.7 magnitude earthquake shook Cayman and a tsunami warning was issued. People in Grand Cayman were urged to stay away from coastal areas ans seek higher ground. Numerous sink holes opened up but there was no significant damage to properties or roads, and there were no reported injuries. Several strong aftershocks (4.9 magnitude) were felt at 4pm and 4.58pm and over the following 24 hours over a dozen more were felt. Thankfully no tsunami materialised.

Finance Related Legal Changes

On January 30th 2020Minister Tara Rivers steered through a batch of legislation to modernise the beneficial ownership regime and enhance the regulatory structures in funds. This was brought to the legislative assembly as a consequence of last year’s damning CFATF review. The Companies (Amendment) Bill, 2020, the Limited Liability Partnership (Amendment) Bill, 2020 and the Limited Liability Companies (Amendment) Bill, 2020 were all passed. Officials said that the bills provide clarity on what constitutes a beneficial owner and the responsibilities of corporate service providers to gather, record and file the information with the Registrar of Companies. The Private Funds Bill, 2020 and the Mutual Funds (Amendment) Bill, 2020 enhance the regulatory infrastructure for investment funds, including previously exempted funds, with the familiar sensible and commercially responsive model that has been the backbone of the Cayman Islands’ success as a leading jurisdiction for investment funds, officials from Rivers’ ministry explained.

The International Tax Co-operation (Economic Substance) (Amendment) Bill 2019 was also passed and has been the subject of industry consultation. The amendments were designed to maintain alignment with international standards and to facilitate effective implementation of the law in a manner which can better withstand the scrutiny of international monitoring and peer reviews regarding the “substantial activities” requirement for no tax or only nominal tax jurisdictions under the OECD BEPS Action 5 on Harmful Tax Practices. On February 12th it became clear that despite passing a raft of laws the Cayman Islands will be added to the black list by the European Union. It is the first British Overseas Territory to be named and shamed. European diplomats told the FT that EU27 ambassadors decided Wednesday to place Cayman Islands on the list of overseas tax territories that do not effectively co-operate with the EU. According to the FT, the law passed by the Cayman Islands to addressed concerns about companies who claim tax advantages but do not have a sufficient economic presence on the island was “deficient”. Cayman’s legislation on investment funds is also, apparently, not up to scratch for the EU. [Information courtesy of Cayman News Service].

In May 2020 Cayman's Premier Alden McLaughlin said that Cayman must be removed from the European Union's black list in October or it will have dire consequences. A new raft of legislation pushed through by Minister Tara Rivers (see paragraph above), which should address any remaining concerns which the EU has and at the same time should provide a legal framework to promote the use of new technology and innovative enterprise. Local accounting firm, KMPG, said just after the news of the blacklisting broke that although the blacklisting is unwelcome news, "we do not believe there is any immediate concern of adverse tax consequences for Cayman investment funds”. The financial services firm said its view, “which is consistent with the general industry view”, was that laws were in place to satisfy the EU before October 2020.

Port News

On Wednesday February 19th 2020 Justice Tim Owen QC said that the referendum law for the port, drawn up by the Cayman Islands Government, was unconstitutional. It is a clear and emphatic win for the people supporting the bid to stop the government building the port. Opposition leader Alden McLean called for the government to drop the cruise port project and get on with other more important things. Premier Alden McLaughlin gave a brief press release in which he said that the Government would be appealing Justice Tim Owen's ruling.

Coronavirus

On January 30th 2020, the World Health Organization (WHO) warned about the rapid spread of the coronavirus (COVID-19).

COVID-19 was declared a global pandemic by WHO on March 11^th 2020 and on March 12^th 2020 Premier Alden McLaughlin informed the local public that one of two seriously ill passengers which were offloaded from the Caribbean Princess cruise ship on March 9^th, was the first person in the Cayman Islands to be confirmed to have the Coronavirus.

From that point, the government leapt into action to contain the spread. All schools in the Cayman Islands were closed from March 16th. On March 17th 2020 it was announced that all bars needed to close, and restaurants could only be open for take-out and delivery. All gyms, spas, beauty salons and public swimming pools were also to close. The government announced that all inbound passengers would be stopped from entering Cayman from Thursday 19th March, except for returning residents, and that the airport and seaport in Grand Cayman would close from midnight on Sunday 22nd March to all international travellers. Flights to the Sister Islands would be limited to residents and essential personnel.

From March 24^th an initial ten-day curfew was imposed, and all businesses deemed non-essential were to close. Every resident, other than essential workers, was ordered under law to stay home between the hours of 9pm-5am. An alphabet system was introduced to control potential crowding within supermarkets. Those with a surname starting with A-K could go out on a Monday, Wednesday and Friday and those with L-Z could go out on Tuesday, Thursday and Saturday. All beaches in Cayman Islands closed over the Easter weekend, and remained so until the beginning of May as over-crowding on the beaches was too difficult to police.

The government secures 200,000 COVID-19 test kits from South Korea through a local contact. Cayman sold 20,000 of the test kits to Barbados and 35,000 to Bermuda. Wide-scale testing would commence across the Island, starting with essential workers, once test kits arrived.

A pension holiday was announced on April 20^th, allowing employers and workers a break from paying pensions. Employees will be allowed to access up to CI$10,000 as a lump sum from their pensions, and then a further 25% of the remaining amount of their fund. This was a huge relief for many people as the Chamber of Commerce report on the state of Cayman’s businesses published on 27^th April 2020, revealed that between March 13th and April 17th 2020, more than 1,400 employees (about 16% of the respondent's pre-Covid-19 workforce) have been laid off. Chamber President Woody Foster acknowledged that since this survey covered only about 300 of Cayman's employers, the true number of layoffs was likely far worse.

The government detailed a 5-level phased reopening of the Island, ranging from maximum suppression at level 5, to the level 1 all-clear. By July 2020 the Cayman Islands was a largely COVID-19 free bubble an residents could go about their daily lives normally and by September masks were no longer required. Cayman border is beginning to open up with regular flights to and from the US, UK, Honduras and Jamaica, however, with passengers required to quarantine for two weeks on arrival in Cayman, this does not allow for tourism or travel as we know it.

As of January 20th 2021, the Cayman Islands has had a total of 380 confirmed COVID-19 cases and have tested 64,186 people. There have been a total of two deaths due to COVID and there is no local transmission. Anyone entering the Cayman Islands must have taken the full course of the vaccine (two doses) and have had a negative result on a COVID test within 72 hours of flying. They are then tested on arrival and on days 5, 10 and 15. However, if they cannot have the vaccine then they will still have to take a COVID test prior to flying, receive a negative result, and then they must quarantine for 16 days with a geotracker measuring where they are at all times.

For daily updates, visit the Coronavirus page.

Pension Plan Withdrawal Requests

After it was announced that employers and employees could not only take a six month (April-September) pension holiday, but that they could take out CI$10,000 and then a further 25% of whatever balance remains, the Deputy Director of Pensions, Amy Williston, said that the private pension plans, of which there are nine in the Cayman Islands, had had 14,000 requests in one week. The Government's hope is that the pension withdrawals will inject around $500 million into the local economy. However, most pensions have tumbled by between 20% and 30% and not only are some people finding that they have little or nothing in their pensions but it has exposed a catalogue of issues including people finding that their employers have not been funding their pensions properly. Although people are desperate for the money to simply put food on the table, there is grave concern as to what knock-on consequences it be when people come to retire. Government workers cannot withdraw money from their pensions as they are all still fully employed and receiving a salary.

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