The island has retained its A+/A-1 rating which it has held since 2023.
‘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,’ it said.
The agency continues to reference a goods and services tax in its annual report without making an explicit recommendation for the island to pursue such a measure.
‘We expect the government will continue focusing on implementing revenue‑raising measures to address structural budgetary deficits, executing the capital programme, and addressing housing shortages on the island,’ it said.
‘We expect a suite of tax reforms, which could include a GST from 2028, to strengthen and diversify Guernsey’s revenue base and slightly improve its long-term fiscal position.’
S&P is forecasting that Guernsey’s real GDP growth will average 0.6% over the period from 2026 to 2029, and that governmental deficits will average 1.8% of GDP.
The island’s liquid public sector assets are also expected to decline but remain ‘ample’, to 51% of GDP by the end of 2029.
S&P paints a fairly healthy picture for the island if public finances are addressed in the next couple of years.
‘Revenue-raising measures should mitigate the rising spending pressure and the risk of economic activity retreating.’
It said that the island’s credit rating could be at risk if fiscal pressures eroded the government’s liquid assets, for example if it accelerated capital spending without offsetting with revenue-raising measures, or if a significant shift in the global regulatory, tax, and competitive environment undermined the financial services sector.
The rating could be raised if economic performance was stronger than expected.
Tax reforms, it suggested, would increase ‘fiscal space’ for a sizeable capital expenditure plan towards the end of 2029.
S&P flagged concerns about ‘modest’ economic growth, decelerating banking profits, the lack of additional capacity in the island’s labour market, relatively high inflation, demographic pressure on health and social care, and, without changes to the tax regime, a ‘fiscally challenging’ 2026 and 2027. It said it expected short-term capital expenditure would be funded through borrowing. Six months ago, at the previous S&P report, Deputy Andrew Niles said the confirmation of the long-term sovereign credit rating confirmed the island’s ‘strong fiscal position and prudent long-term policy-making’.
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