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Strong economic growth tempered by Brexit uncertainty and cost efficiency moves
The growth in Gibraltar’s economy is expected to continue at such a pace that the government target of at least £2.4bn Gross Domestic Product (GDP) by end-March 2020 “is likely to be achieved a year ahead of schedule”, Chief Minister Fabian Picardo, has declared
In early-July, he revealed the expected “remarkable rate of GDP growth” when unveiling the 2017/18 result of £2.18bn -
an increase of 8.6% on a year earlier, placing the jurisdiction “ahead of other small countries in the world, including Malta, Luxembourg Singapore and Hong Kong”.
He declared: “For seven straight years now my Government has been able to report GDP average growth of over 10% per year.”
“Net Public Debt Yet, Sir Joe Bossano, an economist and as a percentage minister for economic development, told
economy”, he emphasised, adding: “We do not want to see taxation increased as we consider that the best business environment is a low tax business environment both for corporations and individuals”.
Recurrent revenue of £652m is anticipated this year, compared with £614m estimated a year ago and the £635m now forecast for 2017-18. The current year includes £295m expected from taxes, the largest single contributor representing about 45% of income, and the total is £20m more than is thought to have been paid in the last financial year: some £130m will come in business tax.
Recurrent expenditure has been set at £628m this year – up 5.2% - which includes around a third going on government departments, an area where civil service salaries have consistently increased above inflation. Bossano, however, noted: “One thing is clear that the size and the costs of the public sector as it is structured at present is not sustainable even without Brexit. On average the public sector earnings are 25% higher than the UK equivalents and 50% higher than the average earnings in the private sector – and growing.”
A cap has been introduced on increases this year and an independent review of senior public sector salaries and relativities in Gibraltar is planned – the last was 35 years ago – but no existing officers’ salaries will be affected! Bossano said the government was “seeking to increase the level of efficiency in the public sector by looking at working methods and the introduction of eGovernment that increases output without increasing man- power”.
Business losses & gains
For all employed in Gibraltar, gross annual earnings in 2017 rose by an average 3% when inflation averaged 2.6%. At October 2017 the number of Gibraltar jobs at 28,029 was 3.5% or 956 higher - mostly in the private sector - 91% of which were extra cross frontier workers. Budget changes take the minimum wage 4.5% up to £6.75ph, while those earning up to £11,200 will pay no tax.
Securing post-Brexit access for financial services had been critical “in first stabilizing our traditional business lines, and then enabling our sustainable growth to continue”,
Picardo observed. “Of course there will some loss of existing business; there will be some new business also,” he added, while pointing to “some 35 new DLT [Distributed Ledger Technology, or blockchain] businesses coming to Gibraltar - quality firms that will have office space and people employed here in Gibraltar - and coming here because they want to be regulated within the pioneering framework that we have created for them”. [See also Tech-smart units short supply, P16]
Financial Services Minister, Albert Isola, revealed that with DLT license applications in the pipeline, the total will reach 70 new businesses attracted by the “innovative and ground breaking DLT regulatory framework” launched in January. “The rapid development of Gibraltar’s FinTech sector offers opportunities to create a complementary InsurTech Hub”, he noted and there were also two insurance company applications pending that if authorised, “will both have significant capital investment from day one”.
Insuring more
Gibraltar hosts a large insurance community, mostly UK-facing and the result of organic growth over 10-15 years. “The creation of new, highly capitalised, insurers has been more prevalent in other insurance centres, but would send out a very strong message that institutional investors have confidence in Gibraltar and its post-Brexit status”, he suggested, having earlier noted the impact of Brexit “is difficult to predict or quantify”.
However, the Gibraltar Financial Services Commission for which Isola is also responsible, came in for criticism from former Opposition Leader, Daniel Feetham, who suggested a tough new approach to enforcement “is harming the jurisdiction at a critical juncture” after noting: “Gibraltar has always had a very well regulated financial service and insurance sector with an approachable regulator focused on risk and outcome.”
Opposition allegations of “hiding” corporate borrowing by channelling funds through 18 government-owned companies, were “spurious”, Picardo declared, having in his Budget speech committed to filing accounts for them “after summer”.
Ray Spencer
Gibraltar GDP and net public debt
of GDP, is amongst the lowest in EU”: Chief Minister, serious economist would venture to forecast
Parliament in relation to Gibraltar’s exit next year (along with the UK) from the EU: “No
Fabian Picardo the direction in which our economy will or should develop in 2019/20 or later years. The prudential thing to do in such circumstances always is, prepare for the worst and aim for
the best.” A recurrent budget surplus of
£36.1m was achieved in 2017/18 - about twice the originally estimated surplus – but for the current year it is “prudently and conservatively” estimated to fall to £24m, Picardo told Parliament
The 2018-19 budget was designed to encourage established businesses to grow and attract new ones. “We consider the private sector to be the essential engines of our
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