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Economic forecast for 2022 – 2023: In the black for 2023

Government 02 Dec, 2021 Follow News

$7.4m has been allocated for public schools’ meals programmes in 2022 and $14.9m 2023

Cayman Airways is to get $7.2m from government in 2022 and $6.5m in 2023

By Lindsey Turnbull

 

Deputy Premier and Finance Minister Chris Saunders announced last week in his Budget address in Parliament that Cayman’s domestic economy was expected to recover partly, with an estimated growth of 1.2% in 2021. Economic activity was expected to accelerate by 5% in 2022 and an average each year of 3.2% between 2023 and 2025.

Hotels and restaurants were expected to contract further by 88% in 2021, but the sector was expected to recover partially, with an average annual growth rate of 224.9% per year between 2022 and 2025.

The transport sector would contract 26.9% in 2021 and recover with an average annual growth rate of 12% in the next four years, while the wholesale sector would increase 2.2% in 2021 and 3.7% each year from 2022 to 2025. Financial services were expected to expand 1.9% in 2021 and average growth of 1% per year between 2022 and 2025.

Construction projects, including the NCB, Hyatt, Mandarin and Indigo hotels, John Gray High School, the construction of a mental health facility and continued expansion of roads, meant the industry was expected to grow 9.4% in 2021 and average 5.3% growth from 2022-25. Business services would expand by 3.7% in 2021 and see an average expansion of 2.2% from 2022-25.

Inflation would be 1.3% in 2021, 3.4% in 2022 and an average of 2% over the following three years. The unemployment rate would be 5% in 2021 and 4.4% in 2022 and averaging 3.6% in the remaining three years.

In 2022 government operating revenue was anticipated at $940.9m and in 2023 it would climb to a total of $978.1m, while operating expenses would be $921.5m in 2022 and $950.4m 2023.

Major cost drivers would be personnel costs, totalling $437.2m in 2022, and $459.3m in 2023. These costs were from the recruitment of teachers, as well as bolstering the police, fire, prison and border and control services, increasing resources for the promotion and regulation of the financial services industry and increased civil servants’ health insurance premiums.

Supplies and consumables were also going up, with the government budgeting $149.4m in 2022 and $149.2m in 2023. Depreciation was budgeted for $45m in 2022 and $47.5m in 2023 and reflected the increase in value of the government assets as various capital projects were completed, the Minister indicated.

 

New borrowings

Government’s line of credit allowed it to borrow up to $299m in 2022 and $50m in 2023, a total of $349.1 m over the next two financial years. In June 2022, any amount advanced unpaid under the line of credit already established by the previous government would be converted into a 15-year fixed rate amortising loan.

The time had come where the government could not afford to continue depleting its cash reserves and might need to draw on line of credit to ensure that the minimum number of cash days remained compliant with the PMFA. Government would only draw down on the loan funds if and when it was absolutely necessary to do, Minister Saunders said.

With respect to the $349.1m intended borrowings, in 2022 $303.5m would be used to fund capital investments by core government and $59.4m invested in statutory authorities and government companies, of which $45.6 would be met by borrowings.

Government was therefore expected to incur financing costs of up to $14.7m costs in 2022 and $16.9m in 2023, and these would be expenses covering interest and financing costs. Overall debt was expected to increase to $485.4m in 2022 and decrease marginally to $482.1m in 2023. Cayman’s debt-to-GDP ratio was predicted at 9.3% in 2022 and 8.7% in 2023, still one of the lowest debt-to-GDP ratios in the world. Government was currently looking to refinance its existing debt at lower interest rates, Minister Saunders confirmed.

Outputs on Statutory authorities and Government companies would come in at $161.9m in 2022 and $164.8m 2023.

This would be used to fund most of the following:

• Cinico $50.1m 2022/ $51.6m 2023

• HSA $42.4m 2022/ $42.2m 2023

• Cayman Airways $18.6 in 2022 and 2023

• Cayman Islands Monetary Authority $31.8m 2022/$33.5m 2023

Outputs from non-governmental output suppliers would be $42.5 in 2022 and $50.8m in 2023, broken down as follows:

• $20.9m 2022/$21.6m 2023 for medical expenses for uninsured and under insured

• $2.7m per year towards legal aid

• $7.4m in 2022/$14.9m 2023 for the public schools’ meals programmes,

• $2m per year for the care for indigent and disabled elderly people.

The transfer of payments would total $61.5m 2022/$52.9m 2023, for funds to deliver critical social programmes for young people and financial support for some of the most vulnerable in society, as follows:

• $10m per year for local and overseas scholarships for more than 2,500 students.

• $13.7m 2022/$14.5m 2023 for temporary permanent assistance to support the most vulnerable

• $11.1m per year ex-gratia to retired seamen

• $10.3m in 2022 for stipends for people in tourism sector

The operating deficits of statutory authorities and government companies would total a net debt of $35.2m 2022 and 19.1m in 2023, as follows:

• CIAA $14.9m 2022/$3.2m 2023

• Cayman Turtle Conservation and Education Centre $8.8m 2022/$7.1m in 2023

• Cayman Airways $7.2m 2022/$6.5m in 2023.

In 2022, core government was forecast to earn an operating surplus of $19.4m but when factoring the operating deficit of public entities, the entire public sector will have a net deficit $15.8m.

In 2023 core government would earn an operating surplus $27.7m. When factoring operating deficits of public entities, the entire public sector was forecast to have an overall net surplus of $8.6m for 2023.


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