- Economic growth in the Cayman Islands is set to accelerate slightly in 2025 to 2.5% up from 2.2% in 2024 but will remain slower than the 2014-2023 average of 5.0%, according to Fitch Solutions. The current real GDP growth outlook, though close to the government’s forecast of 2.6%, is slightly below Fitch’s previous 2.9% forecast due to the anticipated negative impact of a United States (U.S.) economic slowdown on tourism arrivals in the Cayman Islands.
- Rising U.S. import tariffs are anticipated to negatively impact economic growth in the Cayman Islands. Around 80.0% of Cayman's goods exports were sent to the U.S. in 2023, and sales will suffer from reduced competitiveness in the U.S. market, given the 10.0% baseline tariffs.
- However, the Cayman Islands' economy is predominantly service-oriented, with financial services and tourism being the primary contributors to GDP. Consequently, the small absolute size of Cayman’s exports (US$45.3Mn or less than 1.0% of GDP in 2023) will limit the impact of a goods export downturn on the wider economy. Instead, the negative impact of US trade tariffs will primarily be felt through two channels, namely the cost of imports and the negative implications for Cayman’s tourism sector. Faster U.S. inflation will result in a higher cost of importing U.S. goods into the Cayman Islands, given the high dependence on imports to meet domestic demand.
- Rising U.S. import tariffs will increase U.S. inflation, particularly for goods subject to the highest tariffs, such as steel and aluminium. This will raise import costs for Cayman businesses, pushing up prices for construction materials, food and household goods. As such, Fitch forecasts inflation in the Cayman Islands to average 3.5% in 2025, faster than 2.5% in 2024, slightly reducing real household purchasing power.
- Moreover, U.S. import tariffs will likely contribute to an economic slowdown in the U.S., with negative implications for Cayman’s tourism sector, which accounts for 35% of the country’s GDP and 40% of employment. Real GDP growth in the U.S., which typically accounts for four-fifths of tourism arrivals, is expected to weaken from 2.8% in 2024 to 1.5% in 2025, the slowest since the outbreak of the COVID-19 pandemic in 2020.
- The Cayman tourism sector started 2025 on a strong footing, with stayover arrivals increasing by 5.3% year over year (YoY) in the first quarter. However, the pace of growth will slow as U.S. consumers restrict discretionary spending on travel. Notwithstanding, weakness in tourism arrivals growth will be mitigated by factors including increased airlift capacity between the U.S. and Cayman, the Grand Hyatt’s 382-room opening, and the Owen Roberts International Airport expansion.
(Source: Fitch Connect)