COVID-19 will drag Cayman economy down

| 09/03/2020 | 55 Comments
Cayman News Service
Premier Alden McLaughlin addresses the CEO 2020 conference

(CNS): A significant outbreak of the novel coronavirus, COVID-19, in the Cayman Islands could have a “devastating effect” on the economy as well as people’s health, Premier Alden McLaughlin said at the Fidelity Cayman Economic Outlook 2020 conference. It would “precipitate a drop in predicted economic growth” resulting from a drop-off in discretionary consumption and reductions in travel and tourism. “I don’t want to sound like a prophet of doom but we have to face reality,” he told the audience of business leaders in Cayman on Friday.

Referring to warnings by the Organisation for Economic Cooperation and Development (OECD) that a long and intensive outbreak could tip many countries into recession, including Japan and the Eurozone, he said that local banks in Cayman had followed the example of the US by reducing rates.

The long-term impact of the virus on the cruise industry could be “considerable”, he said, noting that several planned visits by cruise ships to George Town have already been cancelled “as Cayman tries to stay infection free”. 

But the effects are not just on tourism. “Weaker investment and the knock-on effects in financial markets will also impact our economy,” McLaughlin said.

He suggested it was all but inevitable that Cayman, as an open society, will eventually have cases of COVID-19. However, government is taking precautions, such as travel bans, and has restricted all non-essential travel overseas by public servants, including Cabinet members. Urging the business community to follow suit, McLaughlin noted that he, himself, had cancelled a planned trip to London for the Joint Ministerial Council at the end of this month.

The government has so far provided $1m to the preparedness efforts and will provide more if necessary, he said. Cabinet has agreed to a duty waiver on all hand sanitisers, protective facial masks and surgical gloves through to the end of 2020, the premier announced, adding, “I encourage merchants to pass on these savings to the consumer.”

Having laid out a rosy picture of Cayman’s economy under the current and previous PPM administrations, he maintained that “we are in a much better position that we were in 2008 to ride out these storms”.

Beyond the immediate threat of the coronavirus, McLaughlin noted changing global realities, namely the current “rejection of globalization and integration”, such as the UK’s exit from the European Union.

“The Global Britain Initiative is potentially a gateway for Cayman to develop new relationships and to open up new markets” he said. But on the downside, he noted the tension between the UK and the EU as they negotiate Brexit, which he blamed for the EU’s decision last month to blacklist the Cayman Islands as a non-co-operative jurisdiction for tax purposes.

Failing to mention that the Cayman government missed the deadline imposed by the EU to pass the relevant laws to avoid being blacklisted, he expressed his frustration with Europe.

“In what sense exactly is Cayman non-cooperative?” he asked. “We have put in place very effective information sharing arrangements that allow us to provide responses to requests from taxation and law enforcement authorities across the globe. Equally, Cayman has been willing to adjust its legal and regulatory frameworks in order to keep pace with global standards and the requirements of international bodies including the European Union. Specifically, since 2018 Cayman has made some 15 or more legislative changes in order to meet the myriad requirements of the EU.”

He said that Cayman was negatively affected by Brexit because previously the British finance minister would have been present at the meetings with the EU and could have spoken on our behalf. He claimed that if the UK had “still been a member of the EU then what is a technical blacklisting could have been avoided”.

In order to deal with the situation with Europe and because the interests of Cayman and the UK are not always aligned, the Cayman Islands Government has “decided to establish a permanent presence in Brussels, subject to obtaining the requisite approvals” the premier said. “As we have learned, while periodic engagement can and does yield results, the EU bureaucracy grinds on in between such times and experience tells us that we need to invest in more routine engagement.”

Despite the predicted downturn in the economy, the premier maintained an optimistic outlook in the long term. “I see plenty of opportunity for Cayman. I remain ambitious for my country and I am determined that the government I lead will complete its two terms and leave Cayman in a considerably stronger position than we found it.”

See full address in the CNS Library


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Category: Economy, Politics

Comments (55)

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  1. Anonymous says:

    As Elon Musk said, “the panic over corona virus is dumb”. Not only is the panic dumb, but people are acting dumb in general. With such idiotic group behaviour, the next thing that might happen is a gigantic war where 100 million people die. The obvious rationale for the war will be things like climate change, recycling, and plastics or some other unverifiable reason dreamt up by the powers that be and believed faithfully by the sheeple. After all, when faced with climate catastrophe and people who refuse to adjust their carbon output, why not get rid of them altogether? Whatever happened to the old Caymanian seaman common sense?

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  2. Anonymous says:

    EU blacklist will drag economy down. Wasting $9 million on a port no one wants drag the economy down. A dump that is constantly on fire poisoning everyone here will drag the economy down and for the next twenty years as people start to drop like flies. Having an abusive drunk house speaker supported by government will drag the economy down. Having completely useless self serving self preserving politicians running the country will drag the economy down.

    And that’s just in the last couple months …

    Vote in the new and get rid of the old !

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  3. Anonymous says:

    Complete bullshit.
    Medical industry and its shareholders will make millions of this situation. Money will be parked in Cayman.
    As usual the rich will get richer at the expense of the poor.

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  4. Elvis says:

    The governent need to lock it off now stop waiting and make a decision for once, your people are in danger yet you continue to let flights in cruise ships disease too.
    I applaud Italy for their lockdown but money talks here and people will be put at risk by spineless politicians , sad but so true.
    Lock it off

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  5. Anonymous says:

    Build our port!

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  6. Anonymous says:

    All I hear out of Alden’s mouth is blah, blah, blah. What ever the situation, I do not trust the man. Self gain and preservation is all he is about. Nothing and certainly nothing less.

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  7. Anonymous says:

    I am so sick of washing my hands I think I’m just going to bathe continuously until all this is over. Visitors will just have to get used to it.

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  8. Anonymous says:

    Washing your hands is the key, but sadly many people here don’t like to wash their hands – I have witnessed many times people using a restroom and walking out without washing hands!!!! Ewwwww

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    • Anonymous says:

      Few children get sick for some reason and they are not obcessed with washing their hands.
      You attract what you focus on, wanted or unwanted.

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      • BeaumontZodecloun says:

        It is not for those of us with good immune systems that we wash our hands or take other precautions against getting sick; it is primarily for our elders. The more people who don’t get sick with the seasonal flu or CoVid, the less of our elderly that will die from complications associated with various viruses.

        Be safe.

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  9. Anonymous says:

    Good old climate change allowing viruses to thrive and fester more prevalant while the knuckle heads at government allow developers to rape our environment by destroying our mangroves and wild life, only to turn around and blame cats for the predicament where currently in. I suppose the cats set the dump on fire too.

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    • B.Reasonable says:

      Viruses thrive in cold dry weather than in warm moist weather.

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      • Don't be reeee says:

        Then why hasn’t the corona virus made it into Alaska?

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        • Anonymous says:

          It is there, didn’t come under radar yet.
          People in Alaska stay home during winter and drive cars. You won’t see many people walking, let alone during winter. Public transportation exists, but majority rely on personal vehicles.
          This winter they have epic snow, which further keeps them indoor, for roads are treacherous.

          P.S My niece is a nurse in Alaska hospital.

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  10. Pay it back says:

    Join the movement. Make them pay the 9 million back wasted on the Port Fiasco.

    #payitback……..

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  11. Anonymous says:

    We are so fortunate to live in Cayman and we should protect it at all costs and the first step in doing so is removing every single damn MLA (except Ezzard) and start over. The new ones certainly cannot do a worse job that the current clowns.

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  12. Anonymous says:

    Cabinet and our Chief Medical Officer think it’s a great idea to hold Coronavirus “public meetings” to tell the village idiots without internet about avoiding public meetings because of threat of Coronavirus. You can’t make this stuff up.

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  13. WhaYaSay! says:

    I guess Eric Bush moving to Brussels now SMH

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  14. Anonymous says:

    Billions of indirect coronavirus victims.

    Bloomberg, the US financial information agency, reports on the main victim of Covid-19: “Coronavirus could be a mortal blow to the longest-running economic expansion in history,” specifying that “the US may already be in recession.”
    In official statistics, the consequences of the epidemic (so far) are not reflected, but in this case the truth is more likely on the side of financial journalists than senior US officials.

    From a formal point of view, recessions are considered officially confirmed only after the economy of a particular country fixes two quarters of GDP decline in a row, but it is easy to notice that this definition is lagging and, in fact, it is useful only if the situation is “borderline” that is, when the prospects are not very clear, the reasons for the change in the economic situation are the same, which means that statistics should be examined literally under a microscope.

    In the case of coronavirus, everything is more prosaic and much rougher: the reason for reducing GDP is obvious, stopping its effects by some budgetary or credit impacts seems to be a rather difficult, almost unsolvable task. The question of how strong and prolonged the contraction of the American and European economies will be (and China probably avoided recession) is far from idle, because in a world interconnected economy, a crisis in the USA or the European Union can provoke (as 2008 showed) a crisis on global level.

    But there is good news for the American economy. The British Financial Times reports about them, pointing to the well-known empirical rule for determining recessions, which was developed by the US Central Bank: “The authors of the rule from the Federal Reserve Bank of New York, who developed this method, indicate that historically, when the unemployment rate increased by 0, 35-0.50% of the lowest level recorded over the past 12 months, the US economy has almost always entered a recession.
    The good news is that we can make a very clear conclusion: the US economy was not in a state of recession or even close to a recession when the coronavirus arrived in February. “That’s fine, but this statement has an important flaw:” Bad news is that the virus has shown in China, South Korea, Italy and other countries that it can cause extremely destructive recession forces in any economy in which it spreads. ”

    Bloomberg points out that the coronavirus attack hit a system that was already in a vulnerable state: “Covid-19 hit an economy that was less stable than it seemed. The number of non-farm workers grew by 1.4% in January compared with a year earlier, which is normal, but industrial production decreased by 0.8% in January compared with a year earlier.
    And the government bond yield curve (USA) was dangerously close to the inverse (the inverse of the yield curve, in which long-term interest rates are lower than short-term ones, is a strong indicator of the recession). “The only strong indicator in January was the stock market, and now because of the coronavirus, this indicator also flashes red.”

    The USA is one of the countries that is characterized by the so-called financialization of the economy. And in the American case (as in the case of the European Union, but not China or Russia), the stock market is not just an indicator of the state of the economy. Rather, if you exaggerate a little, for the United States and the European Union, the stock market is the economy.

    American and European bonds now bring scanty or even negative income, which forces investors to keep their savings (which they expect in the future as a pension) in stocks, moreover, we are talking about non-trivial amounts. According to the Investment Institute Company, even if we take into account only the most common pension plan, we are talking about several trillions of dollars, and these dollars evaporate right in front of the “savers”, which is unlikely to contribute to their desire to consume additional goods or services.

    On the other hand, these are all the problems of relatively wealthy Americans who generally have savings, while 74% of working US citizens (data from the American Payroll Association) live from paycheck to paycheck, and for them the introduction of even a monthly or two-month quarantine, which would assumed the temporary closure of enterprises or services, would be a financial disaster.

    If you look at the situation from the inside of the financial market, it’s hard to find reasons for optimism: “In contrast, talk about recession is thriving in the financial markets.” This is what seems like the beginning of a recession after a long “bullish” market, “said John McClain, portfolio manager at Diamond Hill Capital Management, Bloomberg News.” (Today) is the first day of meeting with panic in the market, “he added.

    In a sense, the modern global economy resembles a bicycle, that is, it can be in dynamic equilibrium only in a state of forward movement, moreover, rapid movement: if growth stops, then this is not just a stop, but a serious problem that can lead to a systemic crisis.
    In this context, it is logical that experts and investors require central banks and governments to “actively pedal” the economy. And the first steps in this sense seem to have been taken: the Federal Reserve urgently reduced the interest rate on the dollar, and similar measures are likely to be taken in other countries. The problem is that the possibilities of this kind of incentive are small since the time of fighting the 2008 crisis: lowering interest rates, which are already at a negative level in the European Union and barely exceed one percent in the United States, is not a very effective measure, and the ability of states to stimulate the economy through budgetary funds is also, in a sense, limited by the serious borrowing of the countries of the “collective West”.

    So it turns out that unnoticed by the main hope that the world economy will not plunge into a recession and pull the economies of the USA and Europe behind itself, will be China, which has already (seemingly) “almost” recovered from coronavirus. As the flagship of the American business press The Wall Street Journal writes, “The good news is that China’s actions seem to have worked or at least slowed down the rate of spread (infection), laying the foundation for a possible recovery of (economic) activity. One key the question is: will the lifting of quarantine and other restrictions lead to new outbreaks in China? This could make the resumption of Chinese production uneven. ”

    Donald Trump is probably quite annoyed to read that the American economy, despite all its efforts, depends on China, both in terms of demand for American goods and in terms of supplies for American manufacturers, including even vital medicines.
    Moreover: Trump is in the midst of a presidential election, and therefore, the speedy and decisive recovery of the Chinese economy is the best thing that can happen to his election campaign.

    However, everyone will benefit from such a development of events: if at least one of the leading economies in the world does not really get really sick because of the coronavirus, there is a chance that a global recession can still be avoided.

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  15. Anonymous says:

    All countries now interdependent and interconnected, therefore the influence of the coronavirus affects the entire global system.

    CIG be able to maintain stability even if the situation in the global economy worsens IF it has sufficient accumulated reserves to ensure stability in crisis times.

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  16. Anonymous says:

    Did government have the foresight to save money for a rainy day? Doubtful.

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  17. Anonymous says:

    Will it affect the money laundering businesses like Restaurants, Churches, Watersports?

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  18. Anonymous says:

    Viruses do not survive in warm weather.

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    • Anonymous says:

      Got 18 in the LA that beg to differ.

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    • Anonymous says:

      Please stop posting the dangerously stupid internet medical advice. The human body is normally 37 degrees Celsius, before onset of fever, and all manner of viruses do just fine in there, as we’ve seen.

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      • Anonymous says:

        Who should I believe the President of the United States, who is a very stable genius, or you, and anonymous blog commenter?

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  19. Anonymous says:

    Is testing for Covid 19 possible in Cayman yet? Last I heard swabs had to be sent to Florida which can’t even keep up with its own population. Without testing we are flying blind- it could already be spreading in the community.

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    • Anonymous says:

      We don’t need to build a hazmat lab here, we just need test kits, which we also don’t have, and for which there is a worldwide shortage. The Chinese factories that make these kits, have maximum production output of 1.5mln kits per week. That’s 78mln kits per year, which won’t be enough to test all of the worried-well that are poised to derail our hospitals with their hypochondria.

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      • Anonymous says:

        Please do not spread false information. The coronavirus test kits for America are manufactured by the Center For Disease Control in Atlanta. They supply the American market and next year we will get some here.
        There will be none available from China here. The Asian market gets first priority.

      • Anonymous says:

        Source? Where are you getting your test production numbers from? Based on Wikipedia, there are 5 Chinese facilities producing kits – 1 of which is making 1.7 million per day of one type of kit and 350,000 of another type of kit per day as well, which is 748,250,000 per year – from, again, 1 company of 5 in China alone. The WHO, US, South Korea, Japan and Singapore are also producing or have announced test kits that are going to be produced by different labs. How do you think other countries are testing? There are going to be more than enough tests worldwide. Why try to spread unsupported rumours about something like this? https://en.m.wikipedia.org/wiki/COVID-19_testing. Multiple sources in the footnotes.

  20. Anonymous says:

    nope…politicians dragging economy down due to lack of planning and serving the rich…

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  21. Anonymous says:

    House of cards.

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  22. Anonymous says:

    I as a Caymanian rather have a virus drag the entire economy down than old egotistical men dragging the economy down.

    Virus is a solution to the corruption of you all 50+ year old timers.

    Sorry but welcome to new Earth..

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    • BeaumontZodecloun says:

      You paint with a really broad brush– characterising all 50+ as corrupt. There are many from my generation that don’t recognise nor feel the entitlement of your generation*

      *see what I did there? Was that fair?

  23. Anonymous says:

    Yes, primarily due to hysterics.

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  24. Anonymous says:

    Covid-19 can’t survive in our smoke filled atmosphere. God bless the dump!

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  25. Anonymous says:

    …or sick/feverish people could actually stay home, healthy people could stay a couple meters away from others, wash their hands properly and not put fingers near face for a few weeks – ie not tempt fate by convening/attending/speaking at a close quarters conference. Humanity would then recover in 3-5 weeks and normalcy return.

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