The Treasury Minister insists there is no evidence that the Isle of Man is in recession.

Figures from the government’s latest national income report show that the island’s economy has shrunk in real terms for three consecutive years.

Although Gross Domestic Product (GDP) increased from £5.6bn to £5.8bn in 2022-23 – the most recent data available – it actually fell by 5% when inflation is taken into account.

Gross National Product (GNP), which includes net income earned from abroad, fell by 2.6% in real terms in the same year.

Real-terms GDP had remained positive for almost 30 years, apart from a slight fall in 2015-16, until the Covid pandemic. There was then an 8% fall in 2020-21, blamed on its impact, before growth returned the following year, with GDP up 3.4% after inflation.

However, GNP decreased by 8.7% in 2021-22 due to a fall in overseas income, and by a further 6.3% in 2022-23.

Treasury Minister Dr Alex Allinson said: ‘Treasury does not believe the Isle of Man is currently experiencing a recession, though acknowledges the challenges facing some sectors and the current period of global economic uncertainty.

‘An economic recession is generally defined in the UK as being two or more consecutive quarters of negative real (inflation-adjusted) GDP growth. The Isle of Man does not produce quarterly GDP figures.

‘Since 2018-19, there has been negative real GDP growth in 2020/21 (-8.0%) and in 2022/23 (-5.1%). Whether or not these years of negative growth would be considered a “recession” is debatable, especially given the prevalence of corporate Incomes in the island's GDP figures and the significant impact that corporate restructuring can have on GDP without directly affecting the economy as experienced by residents.

‘Personal Income over the same period shows a picture of incomes keeping pace with inflation except in 2022-23, where very high inflation eroded this.

‘In regards to whether the Isle of Man is currently experiencing negative growth in either personal income or GDP more widely, we have to look at a wider range of measures. Treasury is encouraged by strong employment figures, low unemployment, and strong income tax receipts as being indicative of a healthy economy. Median earnings also grew in real terms in both 2023 and 2024.’

Questions about the national income report were raised during last week’s Tynwald sitting.

Ramsey MHK Lawrie Hooper said: ‘Decreases in GDP over two consecutive quarters are typically referred to as a recession in other jurisdictions. This is three years of reduced economic activity. What you are seeing is prices going up and productivity going down.

‘These are not the signs of a healthy, well-functioning economy. They are serious signs of potential weaknesses.’

Enterprise Minister Tim Johnston acknowledged that the economy had experienced a ‘general downward trend’ in both real GDP and GNP from 2017 to 2022-23.

He said: ‘There have been a range of challenges that have impacted real-terms growth over the past years, some domestic and some beyond our control,’ citing Russia’s invasion of Ukraine and rising energy and living costs.

Mr Johnston said the data only covered up to 2022-23 and that progress had been made since, with more than 1,500 new jobs created since 2020.

‘We have to step back and say it’s been a massive challenge, and despite everything we’ve faced, we’ve maintained a level of stability,’ he said.

‘Am I standing here and saying everything’s rosy? Absolutely not. It is important that we maintain confidence. All of us in this honourable court have a responsibility to ensure we don’t talk down the economy.’

Mr Hooper said he was ‘blown away’ by the suggestion that the economy was stable, given that it had been reducing by an average of 5% a year.

‘This is what the official government statistics are telling us. This is not a good news story,’ he said. ‘People are spending more money on the island because prices are going up, not because the economy is growing.’