Treasury minister responds to figures highlighting contracting economy

Dr Allinson says GDP alone does not reflect economic health, pointing to low unemployment

The treasury minister has responded to newly published national income figures showing the Isle of Man’s economy has contracted in real terms for a second consecutive year, warning against relying on GDP alone as a measure of economic health.

The comments from Alex Allinson come after the latest National Income Report showed inflation-adjusted Gross Domestic Product had fallen for two successive years, highlighting a prolonged economic slump.

In October, Dr Allinson had said there was “no evidence” the Island was in recession.

The new figures were released in the same week that Chief Minister Alfred Cannan said he was working with Treasury and the Department for Enterprise to restore confidence in the economy, suggesting concerns were based "more on sentiment than evidence".

Asked whether he was reluctant to use the word recession because the situation was worse than suggested, Dr Allinson said the data published by Statistics Isle of Man relate to 2023-24 and are subject to a time lag.

He also pointed to recent comments from the chief minister acknowledging the need for improved and more timely economic data.

He accepted that GDP has been falling in real terms over the past two years, but says output has continued to rise in absolute terms and that high inflation over the period - which peaked at more than 11 percent - had a significant impact on the figures.

He describes GDP as “a crude indicator” of the overall health of the economy.

Dr Allinson believes that when looking at current conditions, unemployment remains very low at 0.6 percent, banking deposits are “close to record highs”, and the economy has shown resilience over the past year.

However, he acknowledges that conditions remain difficult for households and businesses, particularly within the domestic economy.

He says the Island is experiencing an “economic slowdown” following rapid post-pandemic expansion, adding that business and consumer confidence have taken a significant knock over the past couple of years.

He expresses hope that easing inflation and interest rates would be reflected in more positive figures when newer data are published.

Dr Allinson also claims the national income figures do not fully capture challenges within specific sectors, including eGaming, where the number of licences has fallen over the past year.

He says government has been meeting with businesses to look at how existing activity can be supported and expanded.

On whether the Island Plan is delivering, particularly in light of contractions in ICT and construction despite government’s emphasis on a “Digital First” approach, the treasury minister says visitor numbers have increased year-on-year and pointed to changes around the timing of the Manx Grand Prix as signs of optimism.

However, he admits the Island has faced “very difficult years and has significant challenges ahead”.

Insurance is the single largest contributor to GDP, and Dr Allinson says he does not believe the Island is becoming overly reliant on the sector, describing it as 'mature and well-established'.

He also points to growth in banking and claims government’s role is to ensure businesses have the right environment and workforce to expand – highlighting the importance of reforms to apprenticeship schemes and the work of the Skills Board.

Concluding, he hinted at government plans to make significant announcements next year, aimed at boosting the local economy, increasing consumer confidence, and “putting more money back into people’s pockets through the next budget”.

Listen to the full interview with Treasury Minister Alex Allinson via the Manx Radio Newscast below: