The government is predicting a three per cent growth in the economy this year despite the dire international economic situation, as recession threatens the US, prices of oil and food reach new heights and financial markets remain unstable.
Finance Minister Tonio Fenech said the situation on the international scene was "not rosy" but despite this, the local economy was performing well. He said the predicted economic growth for this year is only slightly lower than that of 2007 which stood at 3.8 per cent.
Mr Fenech was speaking at the launch of the Economic Bulletin, which gives an overview of how the economy fared last year and the forecast for this year.
The cost of living last year rose by 0.7 per cent, which was one of the lowest rates in the EU, he said. While admitting that this was affecting many families, he said the cost of living adjustment granted in the last budget as well as the revision of income tax bands and the expanded children's allowance made up for it.
The government does not feel that more compensation for the cost of living was needed at this point in time, adding that this "was not on the agenda".
Pressed further, he said the rise in the cost of living was definitely affecting families but pointed out that consumption had not dampened, "so the purchasing power is there".
A meeting of the Malta Council for Economic and Social Development is scheduled for Friday when the government will deliver a presentation on the international situation and what it is doing to shore up against its effects.
"The situation on the international scene does not look rosy. (The price of) oil has soared to $127 per barrel and is expected to reach the $200 mark by October.
"There was also the increase in the price of grain and instability in financial markets. However, we are predicting a three per cent growth, which is just slightly lower than that for 2007. Despite the circumstances, we are predicting growth. The country is not helpless in the face of these realities," he said.
The first three months of this year were positive, especially for manufacturing and tourism, with a high demand for work and a general positive outlook for the year, Mr Fenech said.
Referring to a few of last year's results - a year he described as "very positive" - Mr Fenech mentioned the significant improvement in the external balance on goods and services. Moreover, the current account deficit dropped from 8.3 per cent of GDP in 2006 to 5.5 per cent last year.
Employment rose by 2.2 per cent and unemployment slipped to 4.4 per cent. Moreover, part-time employment went up by 8.3 per cent.
The government deficit was reined in to 1.8 per cent, he added, reiterating the government's promise of a surplus by 2010. Asked about the surcharge, which is fixed until the end of next month, Mr Fenech said its revision was "inevitable", but could not say by how much it will rise.
Explaining growth in the manufacturing industry in the first three months of this year, Mr Fenech said that unit labour costs had decreased and this made industry operators more competitive.
Replying to a question on STMicroelectronics, Mr Fenech said the government was still waiting for a reaction to its offers. He aimed his guns at the media, saying that speculative stories on the future of the company were doing more harm than good.
It was not true, he said, that the company was incurring losses but the figure that is being mentioned was the differential between the cost of production in Malta and that in other parts of the world.
"The media needs to be more sensitive about this issue," he said.