by Amanda Banks, Tax-News.com, London

The Cayman Islands’ economy grew at a slower pace than expected during the first six months of 2012, by 1.2% of gross domestic product, tracking the rate of growth seen during 2011, following a mixed year for the financial services industry.

According to figures released by the Cayman Islands Statistics Office, the number of banks and trusts registered in the jurisdiction has declined in the 12 month period to the end of June 2012. The number of Class ‘A’ bank & trust licenses fell by one, to 15, while the number of Class ‘B’ licenses fell by 14, to 220 with the sector shrinking by 6% in size. Banking sector liquidity declined by 2.5% as foreign currency deposits fell by 5.6%, predominantly due to a fall in US dollar-denominated deposits by 6.3%.

The Cayman insurance sector saw nominal growth in the number of insurance licenses during the same period, by four (0.5%), to 758. However, the number of ‘Class A’ insurers declined by two to settle at 29, while Class ‘B’ (captive) licences grew by six year-on-year.

The number of mutual funds registered in the Caymans grew markedly by 15.5%, to 10,871. However, this was as a result of the inclusion of Master Funds in the statistics, following the enactment of the Mutual Funds (Administrative) Law (2011) since last year. The size of the remainder of the mutual funds industry (registered, administered, licensed) declined by 2.9%.

The twelve month period under review has been positive for the Cayman Islands Stock Exchange, which saw a 5.1% increase in the number of listed companies in the year to the end of June 2012, and growth of 36.5% in Eurobonds listings from 85 in the same period.

New company registrations declined by 10% over the period, to total 4,794, while foreign employment levels expanded by 1.2% to 20,158. This increase in the issuance of work permits is a substantial improvement on the 7.5% decline for the same period a year ago.

The government has revised its full-year target to 1.4% of GDP from 1.8%, taking into account stagnant growth of just 0.2% of GDP in the financial services industry.

Commenting on the statistics, Cayman Premier and Minister for Finance, Mr McKeeva Bush stated: “The economy continued to post moderate growth amidst lackluster demand for financial services and the government’s commitment to responsible fiscal governance. 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.”

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