Guernsey's credit rating is downgraded from AAA to AA+

Deputy Parkinson said Guernsey's new rating was the best it could expect under S&P's new methods

Guernsey's credit rating has been downgraded by the international agency Standard and Poor's from AAA to AA+.

The US-based ratings agency published its latest assessment on Thursday, amending its view of the Bailiwick's long-term economic stability.

It said: "We consider external vulnerabilities and monetary flexibility as credit weaknesses for the State of Guernsey."

Guernsey's treasury minister said it was down to a new method of assessment.

Deputy Charles Parkinson said: "The new technical scoring methodology does not work in our favour.

"Yet we have been given a high grade score of AA+, the highest rating that is achievable for us," he said.

Countries which have been downgraded by ratings agencies often face higher rates of interest on subsequent borrowings.

However, Deputy Parkinson said this was unlikely to occur following this adjustment.

"It's a marginal loss of prestige. It has no practical implications because we don't have any borrowing, so it doesn't increase the cost to us," he said.

Strong balance sheet

In its report, Standard and Poor's said it had revised the way it grades sovereign jurisdictions.

It said this had been done in order to place greater weight on external economic influences over which there was limited control.

As examples, it cited "potential changes in EU regulatory and tax regimes".

However, the agency noted "Guernsey's success in attracting foreign financial institutions, its prosperity and its very strong government balance sheet".