2022 should deliver a year of above-trend economic growth in the Channel Islands, ITEM Club predicts
The economies of the Channel Islands look to have enjoyed a rebound last year from the economic damage caused by Covid-19, according to the latest EY ITEM Club Winter forecast – Outlook for the Channel Islands report.
This report was commissioned by EY to analyse how the events from the past year have, and will continue to, impact on the Channel Islands economies. The report explores the differing government responses to COVID-19 and how these impacted the economic outcomes for each respective island, the economic indicators which point towards recovery and growth, as well as the key issues facing our economies.
While the barrier to growth presented by the pandemic fades, new obstacles are emerging in the form of surging commodity prices, high inflation and rising global tensions. The islands’ economies will not escape these headwinds, notably the squeeze on households’ spending power from cost-of-living pressures. The structure of the Channel Islands’ economies and the importance of tourism in sustaining employment and local spending does leave the islands, in some respects, more vulnerable to any resurgence in Covid-19 uncertainty.
Martin Beck (pictured), Chief Economic Advisor for EY ITEM Club, explains what will be key to the Islands economic recovery and growth: “The worst of the pandemic looks to be in the past, which should boost confidence and the willingness of consumers and businesses to spend.
“Other forces, particularly strong household finances, are present in the Channel Islands and should go some way to compensate for the return of high inflation. Moreover, the important role played by banking in the islands’ economies means our expectation of rising interest rates should prove a net economic positive, resulting in a faster recovery in banking profits and GDP.
“That said, the economic consequences of rising commodity prices and heightened geopolitical uncertainty have cast a serious cloud over the outlook and something the Channel Islands’ economies won’t be immune from.”
What is the EY ITEM Club?
The ITEM Club is the only non-governmental economic forecasting group to use the HM Treasury’s model of the UK economy. Its forecasts are independent of any political, economic or business bias and this independence is underpinned by the untied sponsorship of Ernst & Young LLP.
ITEM stands for Independent Treasury Economic Model. HM Treasury uses the UK Treasury model for its UK policy analysis and Industry Act forecasts for the Budget. ITEM’s use of the model enables it to explore the implications and unpublished assumptions behind Government forecasts and policy measures. Uniquely, ITEM can test whether Government claims are consistent and can assess which forecasts are credible and which are not.
EY Economics for Business provides knowledge, analysis and insight: helping businesses understand the economic environments in which they operate, both in the UK and globally. Find out more here.