Economic decline could be worse than first predicted, say experts

IT is unlikely there will be an ‘immediate and complete’ economic recovery following the coronavirus pandemic, the Treasury Minister has said, after forecasts indicated that the economy could shrink more than initially thought.

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The Fiscal Policy Panel has published an updated prediction following its previous report in March, when they predicted the economy could experience a 6% decline. Their latest report indicates a ‘steep contraction’ in the economy this year, with the banking sector facing reduced profits due to the cut in interest rates. The Island’s GVA – a measure of economic output – is predicted to fall by 7.5% this year before a ‘gradual and partial recovery’, while there is expected to be a rise in unemployment.

Treasury Minister Susie Pinel said: ‘The coronavirus pandemic has presented a huge challenge to our economy this year. The FPP’s updated forecast demonstrates that we are unlikely to see an immediate and complete recovery from the forecast recession.

‘The government has taken unprecedented steps to support the economy, including the Co-Funded Payroll Scheme, deferrals of Social Security and GST payments, the Covid Related Emergency Support Scheme and the Business Disruption Loan Guarantee Scheme. These schemes were vital in supporting the economy through the peak period of disruption and we now move into the next stage, where we support a robust economic recovery.

‘The FPP’s forecast comes as we define spending plans for the next four years. The performance of the economy will inevitably have an impact on our public finances. However, we entered this crisis in a strong position, with significant reserves and a strong balance sheet, as reaffirmed by Standard and Poor’s credit rating issued in July.

‘In addition to the updated forecast, I asked the panel to provide some summary fiscal advice to help with the difficult decisions ahead. I will review this advice with my ministerial colleagues and the Treasury team as we move forward with the Government Plan.’

The draft Government Plan, which sets out the administrations income generation and spending plans, is due to be debated by the States Assembly in December.

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