By Kevin Shereves
Kevin@caymannetnews.com

Premier Hon McKeeva Bush says the full impact of the financial crisis is expected to be felt throughout the remainder of 2009, but predicts a recovery in 2010.

Outlining government’s strategic policy in the Legislative Assembly on Wednesday, Mr Bush said that, for the coming three financial years, his government would continue to focus on controlling and reducing core expenditure while implementing new and sustainable revenue measures.

Mr Bush recently outlined the fiscal strategy his government established in preparing the 2009/2010 Budget and provided an economic forecast for the Cayman Islands for the 2010/11 through 2012/13 financial years.

Delivering an economic forecast, prepared by the Economic and Statistics Office (ESO), Mr Bush noted that core government operating revenue is forecast to be approximately $580 million in 2010, $585 million in 2011 and $590 million in 2012.

“Economic growth in the Cayman Islands is expected to worsen in 2010/2011, measured by changes in the gross domestic product (GDP),” he said, noting however that the GDP is expected to rebound in the succeeding two years.

Mr Bush said that the current forecast means that the clouds of crisis are beginning to clear away.

“While we are not quite out of the storm, we can see ourselves approaching the end of it. Now is the time to continue to work, to work hard, and harder than ever before, to prepare these Islands to make the best future economic improvement,” he said.

He noted too that core government operating expenses are forecast to be approximately $531.3 million in 2010/11 and $522.3 million in both 2011 and 2012.

Mr Bush noted that government will also decrease aggregate borrowing in a deliberate effort to keep the government’s borrowing levels within the limits prescribed by the principles of responsible financial management.

Criticising the previous People’s Progressive Movement (PPM) administration, Mr Bush said that government’s operating expenses could not be allowed to grow at the rates of the last four years.

“Over the past four financial years, that is 2005/2006 to 2008/2009, government operating expenses grew from $372.19 million to $525.98 million. This is a 41 percent increase in four years,” he said.

“This rate of increase is unacceptable and my government is taking definitive steps to address it in a sensible manner,” he added.

In addition to the expenditure reductions in the 2009/10 budget, the Cabinet has recently commissioned a review of public services to be conducted by a multidisciplinary team headed by the Deputy Governor, Donovan Ebanks, which must report its findings back to the Cabinet in January 2010.

“This will ensure that there is sufficient time for the recommendations to be considered by Cabinet and incorporated into the 2010/11 Budget,” the Premier explained.

Mr Bush said that his government will act as needed to either reduce expenses or increase revenues.

“Whether over-staffing exists in a particular area, if management needs improving, if further training is needed or if processes need to be streamlined, shortened, or otherwise simplified,” he noted.

He also said that his government would enter into partnerships with the private sector for appropriate large-scale infrastructure development, and made reference to DECCO Ltd as the potential development partner to finance, design and build the cruise berthing enhancement facilities.

He also noted that an independent commission will be appointed to conduct a professional assessment on possible revenue sources and their impacts.

The Commission will be chaired by former US Federal Trade Commission Chairman and Budget Director for US President Ronald Reagan, James C. Miller III. The team also includes former UK Member of Parliament, David Shaw, and Financial Secretary, Kenneth Jefferson.

“In making this assessment, the Commission will consider the impact of any form of direct taxation on overall economic activity and examine, in particular, its potential impact on the attractiveness of the Cayman Islands as a financial centre,” Mr Bush said.

“Our primary goal in the area of revenue is to seek a wider and more stable income base for the country,” he noted.

The report, Mr Bush said, is expected to be submitted to Cabinet no later than 28 February 2010.