The Guernsey Annual Gross Value Added and Gross Domestic Product Bulletin 2022 has been published.
The Bulletin contains first estimates of economic activity in 2022 and restated figures for earlier years. While the level of GDP has been restated at a lower level across the time series, the published statistics show a second successive year of healthy growth, with GDP in 2022 increasing by 4% in real terms. Activity within the Finance and insurance sector made a particularly strong contribution to growth, with positive contributions also made by the Construction sector and Accommodation and food service activities.
GDP is used as a baseline for some of the States’ fiscal indicators and the restatement will impact these measures, including those metrics used to monitor the Fiscal Policy Framework. For example the downward revision of GDP means that the metric which measures the value of government revenues as a percentage of GDP, while still low relative to international averages, now stands at approximately 25% against the revised GDP numbers (compared to around 26% in Jersey and around 40% in the UK).
Following the release of the first estimates of Guernsey’s 2022 GDP, Richard Hemans (pictured), the lead on economic matters for the IoD Guernsey Branch commented: “Guernsey’s economy grew strongly again in 2022, increasing in real terms by 4% year on year following the significant increase of 7% in 2021 after the large contraction of 7% during the first year of the Covid-19 pandemic. Guernsey’s economy is now 3.5% larger than 2019, which is positive although lower than Jersey’s growth of 5%. It seems that Jersey had a steeper decline during the pandemic but is recovering more robustly.
“GDP per capita grew by 3%, which demonstrates that productivity continues to improve and is broadly in line with population growth. Real GDP growth has averaged 1% per annum over the last decade, which is similar to the UK.
“The island’s GDP per capita is now the highest it has been in the last decade and has grown strongly since the pandemic, which means that living standards have improved.
“This year’s GDP bulletin sees a change in the methodology of calculating company profits based on the annual economic activity return, which should give a more accurate record of GDP. Company profits grew strongly again in 2022 after falling heavily in the pandemic, rising by 12% in real terms compared with 1% for employee compensation. Strong corporate profits bode well for business investment although weak employee compensation will hold back consumer spending.
“The bulletin highlights again that finance and professional services dominate the economy, directly representing more than 45% of the island’s GDP. Finance and professional services increased by 14% thanks to strong growth across the board, but particularly in banking and insurance. These impressive increases highlight how important these sectors are in driving the economy and supporting the island when other large sectors experience difficulties such as retail and wholesale, which have dropped by 10%.
“The economy enjoyed good growth in 2022, but it is likely that growth will have moderated further in 2023 due to rising interest rates, high inflation and the bleak geopolitical conditions. Whilst many are forecasting a soft landing for the global economy in 2024, the subdued economic performance of our main trading partner (the UK), a complex political and regulatory backdrop, stubborn inflation and elevated interest rates mean that the outlook for 2024 GDP growth is muted at best.”
