Economic growth will not be without uncertainty

GUERNSEY and Jersey should expect a year of ‘above trend’ economic growth this year but will not be immune to rising costs and geopolitical uncertainty, according to a new forecast.

EY chief economic adviser Martin Beck. (Picture by Peter Frankland, 30621144)
EY chief economic adviser Martin Beck. (Picture by Peter Frankland, 30621144)

In the latest winter outlook for the islands, the EY Item Club reported that both islands ‘enjoyed a rebound’ from the economic damage caused by the Covid pandemic last year.

Martin Beck, its chief economic adviser, said returning consumer confidence, strong household finances and higher interest rates should all help the islands’ economies to continue to recover.

‘The worst of the pandemic looks to be in the past, which should boost confidence and the willingness of consumers and businesses to spend,’ he said.

‘Other forces, particularly strong household finances, are present in the Channel Islands and should go some way to compensate for the return of high inflation.

‘Moreover, the important role played by banking in the island’s economies means our expectation of rising interest rates should prove a net economic positive, resulting in a faster recovery in banking profits and GDP.

‘That said, the economic consequences of rising commodity prices and heightened geopolitical uncertainty have cast a serious cloud over the outlook and is something the Channel Island economies won’t be immune from.’

Threats to the islands included global tensions, surging commodity prices, and inflation, the EY Item Club added.

‘The islands’ economies will not escape these headwinds, notably the squeeze on households’ spending power from cost of living pressures.

‘[And] the structure of the islands’ economies and the importance of tourism in sustaining employment and local spending does leave the islands, in some respects, more vulnerable to any resurgence in Covid uncertainty.’

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