Pay growth, profits and economy forecasts downgraded

Wednesday 27 April 2016

Forecasts for pay growth, company profits and economic performance have all been downgraded just six months after they were made.

The panel of independent economists who advise the States on economic policy have reduced the forecasts, saying that salaries and profits will rise at a slower rate than they were predicting in September.

But they are still predicting pay increases of 7.4% across 2016 and 2017 – a forecast that Treasury Minister Alan Maclean has defended in the States, who said that smaller pay rises would mean lower tax receipts.

The update by the Fiscal Policy Panel was made last month, and also include an updated forecast of a rise in interest rates. According to the panel – who have all held senior economics positions in the UK civil service or at the Bank of England – they said that the risks to Jersey’s economy looked greater.

In the States yesterday, Senator Maclean confirmed that the forecasts had been downgraded, but said that the panel had emphasised the need for flexibility to cope with changes.

He said: “The have revised the average earning growth down in 2016 to 2.8% and down in 2017 to 3.6%.

“They did highlight the risks in the economic outlook have increased further. If earnings growth turned out lower than expected, them its likely to lead to lower growth in tax receipts.

“However, this will depend on what else changes in the forecasts, for example inflation, and other factors like measures agreed by this Assembly in future budgets.”