Jersey economy ‘vulnerable to severe economic downturn’

[ad_1]

Jersey’s economy is “vulnerable to a severe downturn” if it does not replenish its reserve funds, independent financial experts have said.

The Fiscal Policy Panel (FPP), an independent group that looks at how well the island generates and looks after its money, said in its latest news that the financial industry “benefited from higher interest rates”.

Annual inflation rate it fell by 0.8% from June to September.but the FPP said Jersey could be left with lower incomes if rates continue to fall.

Panel chair Dame Kate Barker said the government should provide additional money to the Rainy Day Fund (the government’s strategic reserve), currently worth £922 millionwhile growth was high.

She said: “While the global macroeconomic outlook is weak, Jersey is benefiting from higher interest rates which are boosting banking sector profits and government revenues.

“With the economy at full capacity, this should be used as an opportunity to restock Jersey.”

The financial industry represents 20% of the island’s economy.

The FPP said the Rainy Day Fund and the Stabilization Fund, which are used to support the island through major economic shocks, have “diminished” and “have not been replenished, despite strong economic growth and exceptionally high government revenues”.

It said the reserve was forecast to be £1.2m in 2027, “half the minimum value recommended by the panel”, and that it was “unlikely that this reserve would be sufficient to deal with a major crisis”.

She also said long-term health care savings could be “depleted by the mid-30s” without any policy changes.

The FPP said the government should “act swiftly” to add more funds to the Rainy Day fund.

She also made six recommendations to the Finance Minister and the Assemblies of States, including:

  • Considering the sustainability of health insurance and long-term care funds before they “run out”
  • Maintain long-term goals, including maintaining living standards for all age groups, and reverse the trend of declining labor productivity
  • Reassess housing as housing and land costs ‘likely to hold back productivity in Jersey’ as housing transactions fall but house prices remain high

Ministers are to consider the report in advance Government Plan Debate in December.

[ad_2]

Source link

Leave a Comment