A group set up to predict how much money will flow into Government coffers has forecast that income this year will be £23m better than expected.
The Income Forecasting Group is a team of predominately senior civil servants which is chaired by Treasurer Richard Bell and includes the Chief Economic Adviser and Director of Strategic Finance among its number.
On Friday, the IFG released its latest report on how much money the Government is likely to receive in the years ahead.
The increase in income forecast this year is driven by interest rate rises brought in last year. The forecast has improved marginally for 2024 but after that, the prediction is for less income than the group’s expectations published last summer.
In its Spring 2023 report, the group says: “The global macroeconomic outlook continues to remain weak. Since the Summer 2022 forecast, the global economy has been affected by high inflation and low growth. The forecast should be considered against this backdrop.
It adds: “Rising interest rates have been used globally to counter inflationary pressures. This will continue to have a positive impact on some parts of Jersey’s financial sector, driving robust growth for the Jersey economy and thus, Government revenue.
“UK interest rates may be at, or near, their peak and are expected to fall towards the end of the year and into 2024, although there remains uncertainty about the timing of this.
“Nonetheless, Jersey’s position remains somewhat insulated from the global economic context, on a comparative basis.”
Income is forecast to increase this year due to:
Rising interest rates boosting the profitability of financial services companies and their consequential corporate tax contributions; however, this is expected to diminish this year as interest rates plateau and fall.
Higher prices for goods and services, with inflation predicted to peak at 12.8%, increasing GST receipts.
Personal income tax receipts are also forecast to increase this year, with some modest falls between 2024 and 2026.
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