Guernsey Achieves AAA Credit Rating

by Robert Lee, Tax-News.com, London

12 February 2009

Guernsey and the local economy have received a top credit rating from Standard and Poor’s, the international credit ratings agency.

Standard & Poor’s ratings services have this month assigned ‘AAA’ long-term and ‘A+1’ short-term sovereign credit ratings to the island, placing it in the top 25 of more than 120 rated jurisdictions in the world.

The company said that the ratings reflected “a very robust fiscal position, based on sound fiscal policies”.

And though there is recognition of the challenge facing the States in the short-term by the introduction of zero-10 (the new corporate tax regime) and subdued economic activity, the analysts expect the island’s fiscal position to be maintained over the medium term.

The report notes that the island’s tax levels are low, even compared with peer economies and praises the States’ foresight in building up reserves. It also notes that per capita income at USD53,485, is ahead of the AAA average and slightly higher than similar jurisdictions such as the Isle of Man, Andorra and Singapore.

Treasury and Resources Minister Deputy Charles Parkinson said that the S&P assessment was pleasing and reflected well on the Bailiwick.

“Owing to the past prudence of the States we are fortunate to have substantial reserves and a modest level of public expenditure in relation to the size of our economy. While we face significant challenges over the next few years in repairing the structural deficit caused by zero-ten, and in funding our capital investment programme, we start from a position of strength. Having these ratings gives us an independent endorsement of that position.”

Deputy Parkinson said that the rating would help to prepare the States for borrowing, but he denied that any decision had been made on sources of funding for future major capital projects.

“We are still examining funding options for major States projects, with nothing ruled in or out,” he said.

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