Helyar – housing needs quick remedy

Speaking following the publication of this year’s economic and financial stability overview, the Policy & Resources Committee treasury lead said the estimated contraction in GDP for 2020 of just 3% was ‘a real testament to the successful management of the pandemic in Guernsey and the strength and resilience of the local community and economy’.

While it was appreciated that some sectors of the economy, such as hospitality, were still under pressure, strong growth in other areas such as professional services and construction and the strength of the housing market meant that GDP for 2021 was expected to return to about the same level as it was in 2019.

Strong growth in funds and investments saw the performance of Guernsey’s finance sector during 2020 being much better than expected.

‘This reflects the fact that Covid-19 had less impact on finance sector profits than initially expected, reflecting the flexibility of our local businesses,' Deputy Helyar said.

‘Overall Guernsey compares very favourably on a global basis across almost every measure,’ he said.

The exception was the amount which people had to spend on housing, which impacted on free spending money and reduced the amount which could be invested or spent on other things.

This put a brake on the local economy and also made the island less desirable for key workers. ‘It is a clear indicator that we must do more and more quickly to remedy the housing supply issue which has arisen.’

Inflation is expected to rise by the end of 2022, at the same time as the island’s economy is set to recover to pre-pandemic levels.

Despite all sectors of the economy contracting during 2020, in some cases this was not as bad as predicted.

In December 2020 it was predicted that the finance sector would contract by 7%, but the report said that estimates show this was 1.6% in real terms.

The hospitality sector contracted the most over the year, dropping by 20%, due to it suffering from the limitations placed on travel.

But its relatively small size meant it did not make a significant contribution to the island’s Gross Domestic Product, which the report said looked likely to have contracted by 3% in 2020.

Gross Value Added, meanwhile, is indicated to have contracted by 2% during the same period.

In both cases, the figures were significantly better than predicted at the start of the pandemic, since the island’s economy has recovered much faster than expected.

By comparison, the UK economy contracted by 9.9% in 2020, and Jersey’s by 9.2%.

The current central forecast for 2021 is that the GDP will return to approximately the same size it was in 2019 – £3.3bn.

‘This forecast reflects a strong recovery in most areas of the economy and a strong housing market,’ the report states.