The local modelling also forecasts increased unemployment, inflationary pressures, and sectors that rely on tourists will take the worst hit.
In setting out the case to borrow half a billion pounds to tackle the economic crisis in the States yesterday, Deputy Lyndon Trott, the vice president of Policy & Resources, outlined the gloomy assessment that many islanders will be poorer as a result of the crisis.
He urged his political colleagues not to shrink from the battle facing them.
‘Do not bury your heads in the sands members of the States, this is a crisis like no other, we have to make the bold decision so that we can invest in our economic and community wellbeing.
‘The alternatives are unthinkable.’
Details on how the island will pay back the debt mountain have not been released yet, but Policy & Resources is convinced that £500m. is a ‘manageable’ sum, when considered over the context of several decades.
Deputy Trott balked at the idea of increasing taxes during a period of economic downturn which could be worse than the depression of the 1930s.
‘Raising taxes in such conditions is economically counter-productive and would certainly hinder our competitiveness.
‘In short, we’re going to need flexibility of financing that can only come from through borrowing both short-term and long-term.’
The States needs immediate cash in order to finance all of the promises of support it has given to local businesses.
This includes the payroll co-funding scheme, business grants and help to keep Aurigny afloat.
That amount is estimated to be up to £190m., but it could increase to £250m. depending on how long the lockdown lasts for.
The remaining £250m. would be used for an economic recovery package, but plans on how the money will be divided out are still being drawn up and will be debated by the States at the end of May.
In his speech to States members, Deputy Trott sounded pessimistic about whether the island would bounce back quickly without permanent damage.
‘At this stage the full effect on the States financial position of Covid-19 is not known, and it’s not known by anybody.
‘It will be dependent on a number of factors, not least the timescale under which the public health measures are lifted.
‘We have an exit strategy, we have a destination, but we do not yet, for good reason, have a time of arrival at that destination.
‘Therefore the duration and magnitude of the economic shock of this unprecedented situation is highly uncertain.’
He added that it was known that the slump would be bad, but how bad was the unknown.
Yesterday’s debate, held online, was hit by technical gremlins with much of the morning session lost because of a server issue.
Comment Page 16