IoD webinar warns of economic headwinds
2022 MIGHT need to be the year for Guernsey to bounce back strongly from the pandemic because there are economic headwinds on the horizon, an Institute of Directors webinar has warned.
Although the island is well placed for the year ahead, Richard Hemans, chairman of IoD Guernsey’s economic subcommittee, said, there are multiple pressures on the way including labour shortages locally, rising inflation and interest rates.
‘I expect 2022 to be a reasonable year for economic growth but the risks are increasing and 2023 and beyond look more problematic,’ he said.
Mr Hemans, group finance director at Blue Diamond, said he believed the economy was nearing a peak in its cycle and a downturn was likely fairly soon, but Guernsey would be facing these pressures from a position of strength.
Those strengths included growing momentum in the pandemic recovery, the normalisation of the global economy, strong household incomes locally and positive signs of increased investment from local firms.
The finance industry is expected to return to growth this year, buoyed by strong performance in investment funds over the past year or so and in increase in banking activity as interest rates eventually start to rise.
Mr Hemans said he expected inflation to continue to increase, heading above 5% in the coming months, but the prospect of interest rates rising above 1% would have relatively little impact on it, he said.
Mr Hemans shared the webinar with Kitty Ussher, former Economic Secretary to the Treasury and now chief economist at the IoD.
She agreed that inflation would continue to rise ‘and the more I think about it, the more I think it will persist’, she said, while she believed an increase in interest rates was ‘pretty clear’.
