The States of Guernsey’s credit rating has been downgraded for a second year in a row, meaning the island is now in a "negative position" and economic growth is expected to be lower this year than the previous 12 months.
In July 2022 the island's S&P rating was AA-/A- 1 which is seen as a pre-warning of tough times ahead. It is now starting 2023 at A+/A- 1 - one step below the rating given last summer, and within the 'negative' category.
The current rating is now lower than the island scored during the covid pandemic.
In 2021, the Guernsey credit score was AA-/A- 1+ meaning 'stable' which itself was lower than it had been pre-pandemic when Guernsey scored positively with AA- for the long term and A-1+ for the short term.
The ratings are decided by Standard and Poor with its credit scores seen as reflective of the economic stability and success of a jurisdiction.
Pictured: S&P produce credit ratings for multiple jurisdictions.
The credit ratings produced by S&P are described as "forward-looking opinions about the ability and willingness of debt issuers, like corporations or governments, to meet their financial obligations on time and in full".
The S&P assessment is said to recognise that Guernsey’s economy is faring well despite the external impacts of the pandemic and the war in Ukraine, but the forecast states "increasing pressure on health and care services is intensifying the squeeze on public finances, while the shrinking working age population also threatens tax collections".
The credit rating report also warns of further "negative rating action... if the government failed to implement tax reforms that stabilise its funding needs."
The Policy and Resources Committee has used this S&P assessment to highlight the need to urgently address Guernsey's growing financial deficit.
With the tax review debate coming up in less than a fortnight, the P&R Vice President, Deputy Mark Helyar, said:
“A downgrading in our credit rating is something we need to take very seriously, and there’s a real impact on our reputation as a stable, reliable, well-run jurisdiction and to the competitiveness of our local industry. We cannot underestimate what is at stake, and if we become unattractive to business and our economy suffers, our financial problems will get even worse.
"While the announcement from S&P Global is disappointing, I hope it serves as a wake-up call to States Members that there is no time left to carry on going around in circles hoping a solution will fall into our laps. We cannot afford to come out of this debate with half-measures, can-kicking or delay. We need to do what we were elected to do and make some difficult but important decisions for the future generations of this Island.”
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