In a post-Covid world 'stable' is a triumph
AA-/A-1+ might not mean much to many islanders.
It should, however, be worn as a badge of pride.
For the latest rating from bellwether agency S&P Global (formerly Standard & Poor) is a credit to the island and how it has handled the Covid-19 crisis.
That is not to say that all the figures are pretty. No economy that contracts by 8% in one year can be said to be in rude health.
However, the confidence that S&P’s experts have for the island’s immediate financial future is heartening.
A ‘strong recovery’ in real GDP of 4.8% over 2021 offers hope that the fabled V-shaped chart might prove a reality, at least in these islands.
Government deficits are higher than usual but peaked at 3.4%, which is less than half what the analysts first expected.
The ‘more adverse scenario’ that was envisaged when the economic and health crisis hit last year did not materialise and the recovery is likely to begin in earnest this year.
The outlook therefore remains ‘stable’.
In a world turned upside down by lockdowns, second waves, bankruptcies and costly support packages ‘stable’ is a triumph.
S&P do see rocks ahead. Changes to the UK financial sector following Brexit might affect global regulation and the island’s ability to compete.
‘We anticipate that the UK financial sector’s less favourable access to the EU following Brexit will likely weaken prospect for the corresponding sector in Guernsey.’
Anything that could damage the island’s biggest industry, responsible for a fifth of the workforce and over 40% of GVA, is a source of concern.
EU/UK negotiations therefore remain key.
However, the headlines elsewhere are encouraging. The island’s fiscal performance has held up ‘surprisingly well’ in the midst of the health crisis ‘particularly when compared to peers’.
Difficult times lie ahead, that is clear. But the island has given itself every chance of bouncing back from the horror show that was 2020 quickly and strongly.
A stable outlook with limited debt and significant liquid assets gives the States the tools to climb out of a coronavirus-shaped hole.