A GLOBAL drop in interest rates was to blame for the sharp fall in banking profits that pushed Jersey’s economy into its first contraction since the pandemic, the Government has said as it sought to defend the Island’s performance.
Statistics Jersey reported last week that the Island’s Gross Domestic Product (GDP) – the total value of goods and services produced – fell by 0.7% in 2024 to £6.86 billion.
The decline was driven by reduced net interest income in the banking sector, where output dropped by 14%.
Overall, the finance and insurance industry – which accounts for around 38% of Jersey’s economy – shrank by 6.2%, while activity across the rest of the economy grew by 3.1% in real terms
Economic Development Minister Kirsten Morel said the figures showed that the Island’s economy remained strong and continued to perform well compared with other jurisdictions.
“It is particularly pleasing to note that non-financial services grew by 3.1% in 2024, and non-banking financial services had a strong year – showing that Jersey’s economy is resilient and diversified,” he said.
“Financial and professional services have been the engine of growth for Jersey but, because banking profits are sensitive to interest rate changes, we do see volatility year-on-year,” he added.
“That contraction was driven by a fall in banking profits, which are closely tied to global interest rates, something we simply can’t control.”
That view was echoed by Jersey Finance chief executive Joe Moynihan, who said the downturn in banking reflected a “gradual decline in interest rates globally”.
“The decisions to reduce interest rates are taken by independent international Central Banks and are normally based on key economic conditions which prevail,” he said.
“Interest margins are also impacted by the competitive nature of the banking sector. This situation is not unique to Jersey banks but part of a broader global adjustment to the interest rate environment.”
He added that 2025 is “showing signs of stabilisation” and that the finance industry remains “resilient and well-positioned to adapt to changing market conditions”.
The report also showed that the real estate sector contracted by 1.9% in 2024.
John Quemard, president of the Jersey Estate Agents Association, said higher interest rates and tighter affordability “naturally cooled activity”.
However, he said confidence is “now returning to the housing market” but would “take time to realise”, adding: “Interest rates have started to level out, and buyers are actively looking again.
“The overall motivation is the price of property. Sellers who are pricing sensibly and reflecting market conditions stand a much better chance of securing a sale.
“The housing market has reduced by an average of 14% and is much higher in some circumstances, so this needs to be reflected in the asking price to ensure the appetite of buyers.”
Meanwhile, former Public Accounts Committee chair Ben Shenton said the data showed government activity expanding while private-sector output declined – a combination he described as “a warning signal” for the Island’s long-term economic health.
He pointed to the 6.2% fall in financial and insurance activity compared with an 8.5% rise in public administration, arguing that the growth in government spending was “crowding out” private investment.
“Unlike financial services, the public sector GVA growth may not signal innovation or efficiency improvements as it often stems from increased public spending rather than productivity gains,” he said.
“Sustainable growth depends on private sector vitality and innovation, which meddling Government policy continues to stifle. These figures are a strong warning signal.
“The car is heading for the cliff, and it’s imperative that the sat-nav recalculates and sends the economy in the right direction before it is too late.”
