Pain to come but Guernsey is well positioned

Standard & Poor’s, in affirming the island’s credit rating and stable outlook, makes plain the economic impact of measures to combat Covid-19 in a way that only a dispassionate and independent observer can.

It expects the economy to shrink more than it did during the financial crisis, and more than Jersey’s, and take two years to recover. There will be a record deficit, it says, and record borrowing.

Those are the hard numbers so often missing from the States’ own communications, but the human cost is there too in the analysis, with unemployment levels expected to stay well above the norm until at least 2023.

Then add Brexit into the mix. Guernsey’s future is tied up with any deal that the UK can make and any ensuing supply issues if it does not. It is also hostage to political decisions on where the UK positions itself on tax and regulation, so it could become more of a competitor in financial services, and the island will likely suffer as the UK’s influence in the European Union wanes.

Tough times lie ahead, but the island comes from a stable base. Its aversion to borrowing and passion for building up reserves sees it in a strong position to ride out the storm, something that the rating agency recognises.

These economic predictions are, though, just that and the uncertainty surrounding them is much larger than usual.

The large economic bounce expected next year will be dependent on how the world responds to the coronavirus, what progress is made in terms of a vaccine and treatment for example – how much confidence returns.

Brexit is marching on out of the public glare, but the clock is ticking to the end of year deadline of establishing a new deal and relationship with Europe.

In the coming weeks the Policy & Resources Committee will be before Scrutiny to hopefully add more flesh to where we are heading.

The need to act and act fast remains to make the most of the foundations that are already in place.