Economic predictions revised due to sluggish growth

(CNS): With growth estimated at only 0.8% and 1.2% for the first two quarters of this year as a result of the sluggish economic performance, experts from the ESO have revised government’s macroeconomic outlook for the calendar year 2012 downwards from 1.8% to 1.4%. The half-year  report revealed lower-than expected growth in air arrivals, flat financial services indicators, slower than anticipated implementation of public-private projects, the contraction of government expenditure and higher fees which all created a different reality than that originally expect by government in is annual forecast. The Cayman economy grew by just 1.2% in the first half of 2012 compared to 1.3% growth recorded a year earlier.

“A small increase in GDP primarily reflected the positive, yet small, contributions of construction, transport, storage and communication, hotels & restaurants and bars, and manufacturing that were partly offset by negative contribution of the utility sector,” the office stated in the wake of the publication of the report.

Premier McKeeva Bush who is also finance minister said the economy continued to post moderate growth amidst “lacklustre demand for financial services” and he claimed in the face of “government’s commitment to responsible fiscal governance.”
He said “Although, these are challenging times, the 2012/2013 Budget is focused on supporting wide-ranging stimulus measures to give all businesses the best chance of succeeding.”

The one ray of hope for the economy according to the ESO report was with the start of construction on the first phase of Health City Cayman Islands (Dr Shetty’s proposed hospital), and the expected boost to air arrivals with the introduction of the JetBlue service to Grand Cayman.

The ESO also revised the inflation forecast down to 1.7% from 2.1% because of a fall in the average rate. However, despite the continuing economic slump residents were still facing much higher prices in most areas and the decline in inflation was fuelled mostly by the housing market. When it comes to food and drink, booze, transport, clothing, footwear and utilities prices have all increased.

Unemployment is also now inspected to be higher than government predicted pushing up to 6.3% from the anticipated level of 6.2% as the experts said economic activity is not expected to absorb the anticipated increase in the labour force.

Overall the ESO said that during the first half of 2012 the money supply contracted, average lending fell, bank, trust and company registrations fell, property transfers and values all declined and the consumption and production of utilities also fell. GDP expanded at a rate of 1.2%, the consumerprice index increase to 1.4% and imports rose 1.2%. Work permits grew slightly and government’s deficit narrowed slightly while debt also fell below $600million.

See full the ESO’s full report here.