Warning of further fall in Jersey economy
- 31 October 2010
- From the section Jersey
Jersey's economy can expect a further fall next year, a British economist has said.
David Kern, chief economist with the British Chamber of Commerce, argues Jersey's current financial plans rely too much on tax increases relative to spending cuts.
There are plans to raise the Goods and Services Tax in Jersey from 3% to 5% in June.
Overall, the States aims to save £65m by 2013.
Writing in a Jersey Chamber of Commerce newsletter, Mr Kern said if Jersey was serious about growth it must place much more emphasis on spending cuts in the medium-term.
"After falling almost 9% in the previous two years, GVA (Gross Value Added) is likely to record a further big decline in 2010," he said.
GVA is a measure of the value of goods and services produced.
He said a lack of political will in the island was the main obstacle to a credible growth strategy, but if the correct policies were brought in then recovery could begin in 2012.
He said: "Even before the recession, Jersey faced a big medium-term fiscal hole, mainly due to lack of control over spending.
"But the risks are more serious now.
"As in many jurisdictions, not least the UK mainland, the financial crisis caused large permanent losses in Jersey's output and tax capacity.
"Much of the wealth lost cannot be restored. With the right policies, Jersey can start growing again, but only from a lower base.
"The good news is that the economy can eventually achieve a 2% average real growth rate."