The Chamber of Commerce is warning that a prolonged ‘lockdown’ could be disastrous for the economy with massive job losses.
In a press release on a study it just carried out into the economic impact of COVID-19, the business representative organisation projects a startling 10,000 to 14,000 jobs being lost.
Those figures extrapolated from the Chamber’s survey project an unemployment rate of between 20 and 30% - almost triple the current unemployment rate.
The report links this scenario to an assumption of the ‘lockdown’ period continuing for up to four months initially.
The Chamber said its study includes the results of “a significant survey of over 300 local businesses which indicates that 1,416 employees have already lost their jobs between March 13th and April 17th.”
Chamber President Woody Foster said, “What these results demonstrate is that the businesses surveyed have laid off approximately 16% of their staff within the first 4 weeks.”
He added that “taking into account that the businesses surveyed represent around 18% of all jobs in the country the national unemployment situation currently is likely to be much more dire.”
A government Labour Force Survey up to fall 2018 showed that there were 46,178 people in the workforce with over 44, 800 in work - an employment rate of 97.2%.
Recent statistics show that around half of the workforce is made up of work-permit holders.
Latest indicators from the Cayman Islands Statistics Office show an unemployment rate of “3.0% as at Spring 2019.”
The Chambers study also factors in the impact on GDP of a prolonged lockdown.
It forecasts a 15% downturn in within the first to two months (around this period), rising to 19% over three months, and 22% GDP drop after four months.
It projects that 20 businesses are likely to close within the next month, with 130 downsizing, 52 uncertain, while 85 have made no changes.
The outlook for lost salaries with the consequential loss of tax revenue to government and spending in the local economy is equally bleak.
Over CI$300 million is already believed to have been lost in the first two months, rising to around CI$500 million if the lockdown continues for four months.
Last week's change to the Pensions Law allowing private-sector employees to tap into their pension fund is hoped to pump CI$500 million back into the economy - similar to the amount which is anticipated to be withdrawn.
Chamber president Foster explained that the study also provides information to help key community stakeholders better gauge the magnitude of the social challenges that are currently unfolding.
“This enables the Chamber to better understand how certain sectors will be impacted, and importantly, the magnitude of the responses required to assist workers,” he explained.
Mr Foster further stated that “the study recognises the significant measures already taken by the government and their related success factors.”
He said the impact assessment is the first step and that the country now needs to move quickly towards the development of a proposed economic resumption plan, with the public and private sector stakeholders working closely together.
WORKING OUT THE WAY BACK
“The Chamber is looking forward to working collaboratively with the government on a plan to be implemented when the government and its medical experts decide that some domestic economic activity may resume in the country,” he said.
Hon. Premier Alden McLaughlin has announced that in the coming days a meeting will be called involving all members of the Legislative Assembly to get their views on the government’s plans.
“We are thinking and looking very carefully at what is being done in other places such as New Zealand and Germany as well as lessons how not to do it by looking at our neighbour to the north (seen as a reference to the United States) but trying to shape a plan which suits Cayman.”
Commenting on the finding of the Chamber's study, Hon. Minister of Commerce Joey Hew said: “The government continues to place the safety and lives of everyone as the priority. At the same time, we are making significant efforts to ensure that the local economy can safely resume when the time is right and we look forward to working closely with the Chamber on this.”
Hon. Minister of Finance and Economic Development Roy McTaggart said the government is “grateful for the efforts of the Chamber in its response to the pandemic.”
Mr McTaggart noted that “a successful resumption of activity within the domestic economy will require a truly collaborative effort by all community stakeholders and we look forward to working jointly with the private sector on these initiatives moving forward”.
The Chamber has credited the government for its response to the impact of the pandemic in Cayman.
The organisation's president Woody Foster stated: “The fact that we are in a position to begin our planning for some form of economic resumption is a credit to the government’s quick actions to address the safety of everyone at the early onset of this pandemic.
“In some countries, the crisis and related fatalities are to such an extent that it’s difficult to begin planning for the next phase. We are hopeful that if everyone continues to abide by the shelter in place, hygiene and social distancing measures introduced by the Cayman Islands government, we will be in a position to reopen the economy in a measured and safe fashion guided by the government and medical experts.”
According to Mr Foster, “It’s fair to say that everyone knows the impact is negative and we are all concerned. But we felt that carrying out a formal assessment is an important first step.”
He said that the study, conducted by local consulting firm FTS, was carried out to better understand the likely impacts and assist both the government and the private sector in responding to the crisis.
A recurring theme of Premier Alden McLaughlin on the impact of the COVID-19 on Cayman has been one of putting people before profit.
But mindful of the worsening economic impact he has said that government was looking at a structured re-opening of the economy alongside ongoing measures to alleviate the impact on businesses, and the financial burden on employees and their families.
He again addressed the pressing issue in the Legislative Assembly last week while piloting additional relief measures including early pensions withdrawals, relaxing conditions for work-permit holders and securing jobs for Caymanians.
Premier McLaughlin reiterated his government's commitment to “helping people get through these difficult times when the economy is in free fall, when they are laid off or indeed have been terminated, or businesses are teetering on the edge.”
He has also said that the extensive community-wide testing now being carried out will be critical to the decision on when and how to start relaxing restrictions and gradually open up the economy.