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Guernsey's credit rating confirmed at AA-

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Monday 17 January 2022

The international rating agency S&P Global Ratings has retained its assessment of Guernsey's long- and short-term sovereign credit ratings at AA-/A-1+.

This strong credit rating reflects Guernsey's "strong and flexible institutions, wealthy economy, and considerable fiscal buffers." They report:

"Guernsey's economy has progressed through the pandemic relatively unscathed. Recent data shows the economy shrunk by just 3% in 2020, driven by the island's very successful virus suppression and the adaptability of the economy to the pandemic"

However, they also note:

"...we estimate the government balance will remain in a structural deficit of about 3.2% of GDP on average over 2022-2025, well above historic norms. We also do not yet incorporate any new meaningful tax measures into our projections, despite the ongoing GST discussions. We note that previous administrations have attempted but been ultimately unsuccessful in implementing a GST due to strong local opposition. Another avenue mooted has been to cut current spending. However, given the already very small share of central government spending relative to GDP in Guernsey, particularly for its development level, we are less certain such measures would have a meaningful impact."

As a result of the risk this poses to Guernsey's significant reserves, which they describe as providing "an important flexibility buffer in times of stress", they have revised the outlook down from stable to negative.

Deputy Mark Helyar, Policy & Resources Committee Treasury Lead said,

"We are pleased that S&P Global Ratings have once again confirmed our strong credit rating and that we emerge from the pandemic in an economic condition which S&P describe as 'relatively unscathed'.  That is a credit to the strength and resilience of our community and our economy.

However, their revision of the outlook from stable to negative is a warning that we must not ignore our financial challenges.  This year we must address the shortfall in funding public services that we will face as a result of our changing population.  We're living longer and having fewer children and that means fewer people working and paying taxes.  It also means more people using services, especially pensions, health and care services, which pushes the cost of public services up significantly.  We need to safeguard our future for generations to come and we'll be talking about that a lot more with Islanders in the weeks and months ahead."

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