The ratings agency has praised the island for its track record in long-term and fiscally-prudent policymaking; and said that new tax-raising measures should facilitate the execution of an enhanced capital spending programme, even though public sector assets are set to decline, but remain ample at 50% of GDP.
‘The stable outlook reflects broadly balanced risks to Guernsey’s balance sheet and overall creditworthiness over the next two years, underpinned by our expectation that the authorities will continue to prioritise sustainable long-term public finances,’ said S&P.
The island was downgraded from AA-, the rating that Jersey still holds, in 2023.
Its latest report highlights positive trends in captive insurance and investment funds for the finance industry, but raises concerns about the pressure the island’s ageing population places on government finances, with its implications on health spending and revenue generation through income tax.
But it held out hope that tax reforms, including GST, and additional revenue from Pillar Two corporate taxes would ‘increase fiscal space for a sizeable capex plan’ towards the end of 2029, which would see annual capital expenditure move from 1.5% of GDP to 2% over the next five years, though initially this was likely to be fuelled through borrowing.
S&P is also expecting GDP growth to average 0.6% over the next few years, after a 2% growth in the island’s economy in 2024, a stronger performance than 2023.
It said that inflation remained relatively high at 3.3%, and is expecting this to fall further to about 3.1% over the next few years.
But the island’s ‘strong fiscal net asset position’ remains a key ratings strength, it added, even with a ‘fiscally challenging’ outlook for 2026 and 2027.
Jersey has maintained an AA- credit rating, enabling the island to stay ahead of Guernsey, and its Treasury minister has pledged to continue to prioritise sustainable long-term public finances.
‘The island’s finances remain strong, but it is important that we don’t take this position for granted,’ said Deputy Elaine Millar.
‘We know we face the same demographic pressures as other developed economies and need to shift to a longer-term approach for financial decision-making.
‘We have started to curb the growth in day-to-day expenditure and remain absolutely committed to reducing spend, which will mean revenues can be directed towards investing in our island’s infrastructure, and strengthen the reserves that underpin our financial stability.’
Jersey’s States voted at the end of last year to spend £1bn on capital programmes between 2026 and 2029, allocated £308m. in capital spending for 2026, including £174m. for the new hospital, and is now spending £1.28bn every year on its public services. Guernsey, by contrast, is set to spend £750m. in 2026.