Economy grows 2.3% in first quarter

The Maltese economy grew by 2.3 per cent in real terms in the first quarter this year when compared to the same period last year, according to figures released yesterday by the National Statistics Office.

During this period the Gross Domestic Product (GDP) at market prices increased by 4.4 per cent in nominal terms and 2.3 per cent in real terms. About one third of the increase resulted from the higher collection of taxes on products while the rest resulted from increased economic activity.

The agriculture sector registered a modest increase in value added of Lm0.2 million to Lm8.4 million which represents 2.2 per cent of total gross value added. Growth within this sector was partly due to an increase in the value of fresh fruit and vegetables that passed through the markets while livestock meat production declined.

During the first quarter of 2004, the fishing sector registered a small drop in value added from Lm0.5 million to Lm0.4 million. An increase in both the value of fresh fish landed at the fish market and the value of exported farmed fish was registered while a decline in exports of fresh fish occurred during the period under review.

The contribution of the mining and quarrying sector to the GDP was stable at 0.5 per cent in both quarters. The gross value added attributable to this industry expanded by Lm0.1 million to Lm1.8 million, an improvement of 7.8 per cent over the same quarter last year. Such an increase reflected positively in the sector's compensation of employees and operating surplus, with both factor incomes going up in level by 12.6 and 6.3 per cent respectively.

The manufacturing sector's nominal contribution to GDP increased by Lm1.9 million or 2.2 per cent over the same quarter last year. The estimated 9.4 per cent drop in compensation of employees is a result of the reduction in the number of employees in this sector. The relative contribution to GDP fell slightly from 22.5 per cent to 22.4 per cent when compared to the same quarter last year.

The value added of electricity, gas and water supply increased by 15.4 per cent to Lm9.1 million while compensation of employees rose by 9.2 per cent.

The construction sector's share of the GDP increased marginally to 5.2 per cent from 5.1 per cent in the same quarter last year. The gross value added attributable to this industry expanded by Lm1.2 million to Lm20 million, an improvement of 6.2 per cent over last year's matching quarter. Such an increase reflected positively in the industry's compensation of employees and operating surplus, with both factor incomes rising in level by 3.6 and 9.1 per cent respectively.

The wholesale and retail trade industry, which also includes the repair of motor vehicles, registered a drop in gross value added of 1.6 per cent. The compensation of employees operating within this industry increased over this same period at a rate of 3.2 per cent. The contribution to GDP of this economic activity decreased from 11.2 per cent to 10.7 per cent in 2004 over the same period in the previous year.

The hotels and restaurants sector as well as the transport, storage and communication sectors registered modest increases in their value added of 1.3 per cent and 1.1 per cent respectively.

The banking sector performed relatively well and increased its value added by 19 per cent to Lm23.1 million. The contribution of this sector to the GDP this quarter rose to 6.1 per cent from 5.2 per cent a year earlier.

Quarterly estimates for real estate, renting and business activities show improvements in the gross value added, from 14.3 per cent a year ago to 14.6 per cent this year. The industry's gross value added expanded by Lm2.5 million to Lm55.7 million, an increase of 4.8 per cent. The recorded growth resulted in increased factor incomes, with the industry's compensation of employees and operating surplus rising by 1.4 and 5.3 per cent respectively.

The gross value added for the first quarter of 2004 for public administration and defence amounted to Lm31.4 million. This represented a no change situation in a usually ever-increasing sector. The status quo hides a reduction in personal emoluments paid within the central government's ministries and departments, and higher employment earnings within the extra budgetary units. The public administration and defence sector's contribution to the GDP was of 8.2 per cent, down from a share of 8.5 per cent for the first quarter of 2003.

Gross value added in the education sector increased by 3.4 per cent in the first quarter of 2004 over the corresponding quarter in 2003. The government contributed around 78 per cent of the gross value added created within this industry.

The compensation of employees rose by 3.1 per cent between the first quarter of this year and the same quarter last year. In the period under review, this economic sector contributed 7.4 per cent to GDP.

Health and social work and other community, social and personal service activities registered moderate increases in value added of 1.6 per cent and 1.1 per cent respectively. Their combined contribution to GDP decreased from 11.1 per cent in the first quarter last year to 10.8 per cent in the same quarter this year.

In the quarter under review nominal household final consumption expenditure remained at the same level as in the same period a year ago. At constant prices, consumer expenditure dropped by 0.8 per cent or Lm2.1 million to Lm240.5 million. A decline in expenditure outlays was registered on food and non-alcoholic beverages, alcoholic beverages and tobacco, clothing and footwear, furnishings, household equipment and routine maintenance of the house, education and expenditure in restaurants and hotels.

Increases in consumer expenditure were recorded on housing, water, electricity, gas and other fuels, health, transport, communication, recreation and culture and on miscellaneous goods and services.

Compared to the first quarter of 2003, the general government final consumption expenditure declined by Lm1.3 million, or 1.3 per cent, and reached Lm100.6 million. This was mainly due to lower aggregate outlays on intermediate consumption and on compensation of employees. In real terms, government consumption declined by 6.5 per cent.

Outlays on gross fixed capital formation increased by 22.6 per cent to Lm116.7 million. The construction component increased by 12.6 per cent while the machinery and equipment component went up by 31.1 per cent. At constant 2000 prices the increase in investment went up by 21.4 per cent

Exports of goods and services increased by Lm13.7 million or 4.4 per cent to Lm325.4 million while imports of goods and services rose by 0.8 per cent to Lm365.3 million. In real terms exports increased by 10.5 per cent and outpaced the increase in imports, which rose by 6.4. The resulting balance was essentially the main force behind the 2.3 per cent increase in real GDP for the first quarter of 2004.