JERSEY has the capacity to grow its economy over a sustained period to boost quality of life and sustain and improve its public services, according to the Island’s chief economic adviser.
Thomas Holvey, who earlier this year took up his role leading the directorate which advises the government on all aspects of economic policy, said it was realistic to look for continued growth in spite of current economic pressures and a gloomy global outlook.
‘If we can hit 2% real growth over a long period, we’ll have done exceptionally well. Between 1% and 2% would be very, very good, and that is very meaningful for people. It’s not easy but it’s also not unachievable, I really do believe that,’ Mr Holvey said.
Echoing the optimistic tone of the Fiscal Policy Panel’s annual report published earlier this month, Mr Holvey said that by virtue of its levels of reserves, the absence of high levels of debt and what he described as ‘a strong balanced economy’, the Island was in a strong position.
Whereas the UK and global positions are due to worsen in 2023, Mr Holvey expressed optimism that ‘the Jersey position should stay relatively strong from a high base’.
‘Jersey has got a very resilient economy. It’s been through two large economic shocks of Brexit and Covid, plus now the Ukraine war, and it’s proved highly resilient to those economic shocks in a way that the UK economy has not,’ he said.
‘While financial services is our most important sector in terms of pure growth, all the sectors have a significant role to play in a balanced economy. In terms of pure growth, the financial sector obviously is that key element to wider things, and it’s holding up well.’
While he said that a return to what he described as ‘normalised interest rates’ was good for the banking sector and therefore the Island’s tax revenues, he acknowledged that interest rates would hit householders faced either with renegotiating fixed-term mortgages, or dealing with variable rates.
However, he expressed confidence in local banks’ stress-testing, which he said indicated that the majority of homeowners were in a strong position to deal with repayment increases, likely to be between 3% and 4%, even if this would affect spending in the local economy.
‘Banks are reassuring us that they did their checks beforehand and the sensitivity levels mean that people shouldn’t be pushed to breaking-point levels and the risks aren’t that high,’ he said, adding that mass numbers of Islanders falling behind on repayments and the prospect of assets being called in were unlikely.
Former chief economist for the government of St Helena and a former head economist at the UK government’s cabinet office, Mr Holvey joined the civil service in Jersey from the UK Infrastructure Bank where he was the chief economist and chief impact officer.
He described the past few months, with the market reaction to the UK government’s September budget announcement, as ‘one of the weirdest’ for an economist but he expressed optimism about the Island’s capacity to continue to weather external pressures.
‘Economic growth is really important and growing the economy over the next 20 years is something we need to do for people’s lifestyles, people’s incomes, the quality of life and also government revenues to spend on those really important services that the government delivers, whether health or education or others. That growth is really important,’ he said.
Mr Holvey’s department has begun to explore how government might remove barriers for new business and alleviate some of the pressures on existing businesses. He said it was too soon to comment on the work said they wanted to look meaningfully at ways in which barriers may be removed.
‘I’m sure businesses would say they’ve been telling people for a while what those are but let’s do this in a proper strategic manner,’ he said. ‘We’ll do the economic analysis that sits alongside it… in a controlled and strategic way to deliver those benefits in the long-term.’
