JERSEY’S economy shrank by 1.5% in 2024, according to the panel of experts responsible for advising the government on economic matters – who have forecast “a period of elevated inflation” for the next two years.
The Fiscal Policy Panel has published its latest report about the performance and future of the Island’s economy.
The 23-page document acknowledged that there have been “shocks to the global economic framework” since a previous report published by the panel in September 2024.
At the time, the panel had noted local economic growth driven by banking sector profits as a result of rising interest rates, but warned that this was expected to fall.
In its latest report, the FPP stated that the Island’s economy shrank by 1.5% in 2024.
The panel explained that banking profits “appear to have levelled off following the very fast growth in 2022 and 2023 driven by sharply rising interest rates”.
“Falling bank profits, which comprised 20% of total GVA [Gross Value Added] in 2023, is the primary reason for shrinking real GVA,” it stated.
Citing financial fallout triggered by Trump’s new tariff regime, the FPP also highlighted that global economic forecasts have weakened “due to escalating trade tensions and geopolitical uncertainty”.
It explained that this was “significantly impacting major advanced economies”, including the UK.
“This external environment could negatively affect Jersey through increased import prices, subdued consumer demand, and potential reductions in tourism and financial services activities.”
Describing Jersey’s economic outlook as “broadly consistent with the global tone” the report stressed that “a weaker UK economy and higher uncertainty abroad could drive up inflationary pressures locally”.
“A lasting de-escalation from current tariff rates, along with new trade agreements to provide stability and clarity could cause global growth to rebound, however the balance of risks is downward: growth is slowing, uncertainty is high, and financial vulnerabilities are rising,” the report added.
“While some of the extreme tariff increases announced by the US administration are likely to be scaled back, the overall increase in US tariffs is likely to be very significant and there is likely to be retaliation by a number of jurisdictions,” the FPP’s assessment continued.
“For Jersey, this suggests that policymakers and firms should prepare for a more subdued economic environment, build up capital and liquidity cushions, and plan for weaker demand.”
The Island’s most recently published inflation rate was 2.3%.
The panel predicted that “a period of elevated inflation” is forecast for 2025 and 2026, before a return “to more moderate levels” in 2027.
“The living wage, along with agreed increases in the public sector pay award, will cause wage pressure across Jersey’s economy and risks creating more inflationary pressure,” it added.
