Georgina Wilcox

In the Caribbean Overview from Caribbean Report Q4 2012 published by RLB/Rider Levett Bucknall they have reported that because of  “the strong ties with the United States” Cayman’s economy should rise. “Tourism accounts for 70% of Cayman’s economy (with the financial sector accounting for the balance) and the vast majority of tourists originate from the US; the numbers should improve in 2012-2013 as long as oil prices remain relatively steady” the report says.

The construction industry is also growing it says and this was confirmed to me only last Sunday by a local building contractor.

This is an excerpt from the report:

Echoing last year’s report, the Caribbean continues to be gradually recovering from recession, although this varies considerably between islands and it is dependent upon the successful outcome of a number of factors, which could threaten this ongoing recovery. These include reducing debt levels, boosting public and private sector investment and expanding exports. Low potential growth remains a key challenge for the region.

Overall GDP growth for the Caribbean in 2013 is forecast at around 2%, but this varies considerably between islands: Haiti (6%) and Dominican Republic (4.5%) are two of the highest growth economies, while Barbados, Jamaica and St Kitts and Nevis are all expected to grow by around 1%. For 2013, dependent on the outcome of various initiatives, growth could reach 3%.

In September 2012, the IMF pointed out that ambitious reforms were needed for growth to return in the Caribbean. Although the region is gradually recovering after a deep recession, concerns were expressed over low potential growth, high debt ratios and the fact that “tourism and services-dependent economies remain adversely affected by the tepid recovery in advanced economies”.

With a 3.3% growth in tourist numbers to 23.8 million in 2011, the Caribbean

tourism industry is continuing the recovery process which began in 2010

and a higher growth rate in tourist arrivals is anticipated for 2012. The larger destinations, including Cuba, the Dominican Republic, Puerto Rico and the U.S. Virgin Islands, continued the historical trend of leading growth in the region. This subgroup, which accounts for more than half of all arrivals to the region on an annual basis, grew by 4.2% in 2011. In 2011, there was continued growth of the cruise industry internationally and huge investments in cruise ships through to 2014 reflect the commitment and optimism of the industry.

The active Caribbean hotel pipeline (under construction or planned) is around 50 hotels, covering 8,500 rooms; of these, around one third of the rooms are in the luxury category. This pipeline represents a 3% increase in the total room supply. Led by the Dominican Republic’s active programme, other developments include Bahamas and Puerto Rico.

Investment in infrastructure – including major airport expansion – is common across the Caribbean, as the islands seek to increase their appeal to the critical international tourist market.

With a generally lethargic construction industry in the Caribbean, our experience is that there has been very little change in construction prices over the last 12 months.

Market Intelligent – Caribbean (Heavily edited)

Anguilla

After a 2.2% fall in GDP in 2011 – in itself a considerable improvement on both 2009 and 2010 – growth of c1.5% is expected for 2012 in Anguilla.

Antigua & Barbuda

Antigua & Barbuda saw the economy decline by 25% during the 2009-11 period. However, growth of around 2% is expected for 2012, boosted by government expenditure and overseas funding. The Economic Citizenship Programme Act of 2012 was going through Parliament towards the end of 2012, largely seen as a fund-raising mechanism. However, it is a controversial move within the islands, with much debate about the benefits, and the UK has concerns about its monitoring.

Bahamas

Bahamas’ economy grew by 0.2% in 2010 and 1.6% in 2011, with further modest growth of c2.5% projected for 2012. This is fuelled by the continuing recovery in tourism, foreign direct investment in hotel construction and government infrastructure works. Tourist arrivals were up by 6.4% in 2011, led by a 9.2% growth in cruise ship visitors plus higher air arrivals. The general elections in May led to a change of government, with the Progressive Liberal Party (PLP) taking over from the Free National Movement (FNM). However, no major changes in policy are expected, as the new government is expected to focus on fiscal consolidation and reinvigorating economic growth and employment, while maintaining key social programmes.

Barbados

With an election in 2013, the ruling Democratic Labour Party is expected to be faced by a difficult economic climate in the 2012-13 forecast period. After GDP growth of 0.5% in 2011, GDP is forecast to expand by 1.8% in 2012-13.

Following growth of c4% in 2011, the construction sector has continued to advance in 2012 through activity in the housing market, as well as tourism-related projects.

Bermuda

The Bermudan economy is one of the weakest in the region. After 3 years of successive economic decline, the outcome is for perhaps stagnation in 2012 and 2013 before rebounding slightly in 2014. As a result, its international rating has been downgraded, in large part due to the level of fiscal deficit remaining above 4% of GDP. This will inevitably mean that financing constraints will reduce capital spending.

British Virgin Islands

Heavily dependent on the USA and Europe for economic growth, the British Virgin Islands have not been fully successful in consolidating their economic recovery since the global recession in 2009. Growth in 2012 is unlikely to exceed 1%. The financial services industry has been suffering and there is a need to develop new economic sectors beyond finance and tourism in order to generate economic growth.

Cayman Islands

After a 1.1% growth in 2011, Cayman’s economy is expected to expand by 1.8% in 2012.This is boosted by the strong ties with the United States. Tourism accounts for 70% of Cayman’s economy (with the financial sector accounting for the balance) and the vast majority of tourists originate from the US; the numbers should improve in 2012-2013 as long as oil prices remain relatively steady.

The construction industry is growing, partly helped by duty waivers for building materials, although costs have remained fairly stable. Projects include a CI $300m town centre and residential community including an 18-hole golf course (due to begin construction in East End this year), the forthcoming Cayman Enterprise City (CEC) development, the provision of green energy to the grid via two potential 5 megawatt solar photovoltaic power plants and one 3MW small scale wind turbine project plus plans to expand the terminal facilities at the Gerrard-Smith International Airport on Cayman Brac to accommodate direct international flights.

Cuba

The Cuban economy has remained strong, with growth of 2.5% in 2011 and potentially 3.5% in 2012. In July 2012, a number of accords were signed with the Chinese government, with the agreements containing a loan to finance improvements, and more cooperation on trade, energy, infrastructure construction, agriculture and biotechnology.

Dominica

Having grown by 1% in 2011, total GDP in Dominica is projected to grow by up to 2% in 2012.

Since it was signed in 2004, the diplomatic agreement with China has had a major impact on the development of infrastructure across the island. This has included housing, education and building of road networks. Current or planned projects include a new state-of-the-art hospital in the grounds of the Princess Margaret Hospital, 2 modern police stations, a new Newtown Primary school, a water treatment plant and the construction of the State House, to house the President.

Dominican Republic

Both by area and population, the Dominican Republic is the second largest Caribbean nation after Cuba. Strong exports helped the economy to grow by 4.5% in 2011 and real GDP growth of 5% in 2012 is anticipated. This relatively high growth trend reflects the country’s resilient economy, its diversified export base, robust domestic demand and the expectation of relatively stable macroeconomic fundamentals.

Grenada

Led by growth in agriculture and tourism in particular, the economy recovered in 2011 and grew by 1.1%; expectations of further growth in 2012 are not being fully realised. Tourism and agriculture have been the fastest growing sectors in the economy, but even tourism is slowing down.

The construction industry declined by 8% in 2011 but was expected to recover

in 2012. The government is focusing on encouraging Public Private Partnerships (PPP), particularly to upgrade the major tourist attractions and resolve the problem of the limited quality hotel room stock and the absence of a signature brand hotel

or resort. Grenada’s first international 5-star resort is planned at Mt. Hartman/Hog Island.

Guadeloupe

Guadeloupe is heavily dependent on financial inflows and tourism from France. With the latter’s real GDP projected to grow by only 0.6% in

2012 and 1.2% in 2013, it will affect the island’s ability to grow, with Guadeloupe’s GDP pattern broadly expected to mirror that of France.

There has been some growth in the number of tourists, but the construction sector has been faced with economic difficulties. After 2 years of recession, there was a slight improvement in the second half of 2011, but the industry is hampered by limited budget resources.

Haiti

Since the major earthquake in January 2010, Haiti has seen massive investment and is one of the fastest growing economies in the Caribbean, with 6% anticipated for 2012. The IDB has approved c US $1 billion in projects and is seeking to provide investment of US $200 million in new projects every year until 2020. In addition, Venezuela, Cuba and Argentina have signed new agreements to support Haiti’s development, including agricultural projects and building a new hospital on the Caribbean island. Venezuela has been constructing power plants on the island and dedicated funds to the housing, infrastructure, agricultural, health and education sectors

Jamaica

The Jamaican economy recovered in 2011 to grow by 1.5%. However, the high debt burden has continued to displace needed investments, preventing long-term growth and causing concern at the IMF; Jamaica remains one of the most highly indebted countries in the world.

The construction industry has been badly affected by the global crisis, with developers delaying projects and funding difficult and it may be 2014 before pre-recession levels are reached. For 2012, several major projects are scheduled including the construction of a Marriott hotel in Kingston, the commencement of the implementation of the Harmony Cove project (with an expected investment of US$3 billion over 5 years) and the US$700 million expansion of the Fiesta project in Hanover by an additional 1,000 rooms. The international Hospiten Group has acquired a local hospital and plans to construct a 20-bed private hospital catering to tourists visiting the island’s north coast during 2012.

Martinique

Heavily dependent on tourism, Martinique is enjoying strong demand from the cruise market with 2011- 2012 figures well up on the previous year as some of the top lines in the cruise industry set sail for Fort-de- France. There are several projects to improve the tourist facilities in Martinique. The downtown Pointe

Simon cruise terminal wharf has been extended during 2012 in order to accommodate larger ships, while an adjacent broader development known as Pointe Simon Business Center (featuring an imposing 20-story business tower, a Marriott hotel, and luxury condominiums) is due to be completed by the end of 2012. The planned Bateliere development in Schoelcher includes a 5 star hotel plus apartments, offices and a shopping mall, although there has been a change of owners and the project has been delayed.

Montserrat

The IMF predicts growth of 5% in 2012, following just 0.5% in 2011. It states that the economic outlook for Montserrat hinges upon progress with a series of public capital projects, improved access to the island and a strengthened private sector.

Netherlands Antilles

Although the name “Netherlands Antilles” is still used to indicate the Caribbean Islands which are part of the Kingdom of the Netherlands, as of October 2010 it was dissolved and the five constituent islands – Curaçao, Bonaire, Sint Eustatius, Saba and Saint Maarten – attained new constitutional status within the Kingdom of the Netherlands. Tourism, petroleum trans-shipment and offshore finance were the mainstays of the economy and the islands enjoyed a high per capita income and a well-developed infrastructure.

Puerto Rico

After 5 years of economic contraction, Puerto Rico will see a small growth of c1% this year, rising to perhaps 1.5% in 2013. The government sees this as the start of a major turnaround and is supporting the upturn with a medium-term development strategy. This includes providing tax incentives to promote Puerto Rico as a hub for export services as well as investing in infrastructure projects.

St Kitts & Nevis

The islands have faced financial difficulties and are under a Stand- By Arrangement (SBA) with the IMF. Although economic growth for 2012 has been revised downward to nil, the IMF has seen progress being made. In July 2012, the UK

government announced that it was cancelling St Kitts & Nevis’s debt, reflecting the extremely difficult external environment and the impressive efforts made to get public finances back on a secure and sustainable footing. Along with neighbouring Dominica, St Kitts & Nevis has introduced an economic citizenship programme, whereby foreign nationals become citizens through a government-sponsored investment programme. It is aimed at attracting overseas investors.

St Lucia

In 2011, real GDP grew by 1% (against a government forecast of 4.5%) and 2.5% is anticipated for 2012. The modest growth in 2011 was largely due to expansion in the construction and manufacturing sectors and continued growth in hotels. However, the tourism sector contracted, with a 3.9% reduction in the total number of visitors.

After two consecutive years of decline, the construction sector recorded a 2.1% increase in 2011, driven mainly by investments in the public sector; this was notably on the construction of public infrastructure, much of which is related to

rehabilitation following the passage of Hurricane Tomas. However, the level of construction activity in the private sector declined, reflecting the completion of major projects, lower tourism-related foreign directinvestment and tighter domestic

credit conditions.

St Vincent & the Grenadines

Growth of 1% in 2011 was largely fuelled by an 18.7% increase in tourism

plus 6.5% in manufacturing, while construction grew by 1%. The fall-out from Hurricane Tomas in October 2010 badly affected other parts of the economy, notably agriculture. Projected economic growth for 2012 is 1.8%, with the rate increasing in 2013 as the on-going policies of the government take effect to return economic growth to at least the pre- 2008 level.

As with several other Caribbean countries, the islands have suffered from air access difficulties which have hindered the growth of the tourism sector in particular. As a result, the Argyle International Airport is under construction at a cost of US $240

million and is expected to become operational in early 2014. Other planned and potential projects include a 1,000 unit integrated residential and hotel resort complex and a significant seaport improvement initiative. These will involve international construction firms. Prices in the Grenadines are 10% or so higher than in St Vincent.

Turks & Caicos Islands

After three years of direct rule by the UK, the Progressive National Party (PNP) returned to power in November 2012. It is felt that the Turks and Caicos Islands is ready for economic growth, but it needs to abandon or at least loosen up some of its current protectionist policies to seize upon business investment potential. The islands enjoy a number of advantages – an attractive natural environment, proximity to North American markets, established tourism and a small financial

services industry – but the business environment has not been sufficiently conducive to attract significant overseas interest. Despite a widening of the current deficit in 2011/12, the authorities anticipate improvements in 2012/13. 

The real estate market has enjoyed a strong 2012, with reports of a near 70% increase over the first 9 months of 2011.

A leading project is the North Caicos Yacht Club, a residential/tourist commercial marina development on 154 acres. Having invested over US $30 million in project infrastructure, including sea wall construction, the investors are seeking developers

for the scheme, which includes 97 residential lots, 10 tourist/commercial lots, interconnecting canals, and two sizable marina basins.

US Virgin Islands

After some recovery in the economy from 2010, the US Virgin Islands are facing an uncertain future with the closure in February 2012 of the Hovensa oil refinery in St Croix. After losses of US $1.3 billion over 3 years, the decision of one of the islands’

largest employers leaves the Virgin Islands without its biggest private employer and facing a widening budget deficit and higher energy costs as some of its best-paid jobs disappear, with 2,000 workers losing their jobs. The government is seeking to maintain current investments while crafting “the leanest possible budget” for fiscal year 2013.

Note: All costs shown in attachments are current at 4^th Quarter 2012

The Rider Levett Bucknall Caribbean Report is published annually and provides detailed local construction market intelligence and data. It benefits from more than 40 years of local experience enjoyed by the company.

Rider Levett Bucknall’s long history can be traced back to a small firm of quantity surveyors established in 1785 in Reading, England. Following two centuries of consolidation and growth, three major companies with common strengths and ambitions – Rider Hunt, Levett and Bailey and Bucknall Austin – pooled resources and expertise to form the Rider Levett Bucknall global practice in July 2007.

Rider Levett Bucknall’s cost consultancy, project management and advisory services inform a diversity of project types, locations and clients, responding to contexts as diverse as Asia, Oceania, Europe, the Middle East, Africa and the Americas, including the long association in the Caribbean.

To download the whole of the RLB Caribbean Report Fourth Quarter 2012 go to:

http://rlb.com/index.php/caribbean/