Christian Peregin
Malta may benefit from financial crises
The calm amid the storm at the Malta Stock Exchange: Despite the international turmoil in the financial markets, the apparent resistance of Malta's financial institutions to the financial crisis may be used to attract money our way.
While banks collapse and the world faces a financial crisis, Malta seems to have avoided liquidity problems thanks to conservative banks and a well-regulated financial services sector.
Despite the obvious negative consequences of a global recession, the crisis may have long-term benefits for Malta's economy, according to some experts.
Economist and management consultant Adrian Said feels that, while no economy will be left unscathed, now is the time to take the opportunity to further strengthen and grow the local financial industry on the basis of "the seriousness and robustness of our jurisdiction".
"If Malta comes out clean after the global financial crisis, it will show that the Maltese people should stop placing their money in banks overseas because the local system has proved to be safer and more robust in a time of crisis," he said, adding that a number of foreign companies, especially medium-sized ones, may also be looking at Malta as a stable financial haven.
He said Malta's situation contrasts starkly with that in Iceland, where a banking system built on a "shaky foundation of foreign debts" has resulted in it having liabilities which dwarf its gross domestic product.
"On the other hand, Maltese banks have always taken a conservative approach to lending. This, coupled with the fact that the financial sector is well regulated by the MFSA, has kept our banking system well under control and in a state of health."
Financial adviser Alfred Mifsud agreed that Malta's financial system is very stable and can withstand this external shock. But even though he agreed that local banks do not have the same problems as foreign ones, the notion of turning this into an opportunity is "a bit stretched".
"While Malta's conservative and heavily-regulated banks have ensured a safer situation, if the world falls into a recession Malta will feel the ripple-effects because it is a very open economy."
He explained that many hedge-funds found in offshore centres such as the Cayman Islands are loosely regulated. Following this crisis it may lead to the hedge-funds losing some of their freedom. In turn, this will result in such funds being directed to well-regulated EU jurisdictions such as Malta instead.
Mr Mifsud shares the opinion that Malta will not become another Iceland, mainly thanks to not having so much foreign debt and a less aggressive financial sector.
However, he warned that Malta's economy will have other worries, namely the new utility bills. But these are of "our own making", he argued, saying that the taxpayers will now have to pay for something they should have been paying long ago but never did due to political convenience. Facing the shock of higher utility bills concurrently with the shock of an on-setting recession will make the economy doubly vulnerable, he concluded.
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philip pace
Oct 12th 2008, 09:39
Welcome to the circus,
In my humble opinion, only time will tell!
Stable bananas?
P Debono
Oct 11th 2008, 11:05
The only reason for the modest boom in financial services in the country is simply down to foreign investment. For instance, it was the introduction of a foreign bank (HSBC) that paved the way for truly international banking in the Maltese islands. Not to mention the appointment of a man with vast experience in foreign markets (Roderick Chalmers) as chairman of BoV.
So Chris, you're suggesting that we should go back to the 1970's and reject any injection of foreign capital in our shores? Maybe you should have sought the opinion of accountants as opposed to "management consultants" for this article.
Ray Axisa
Oct 11th 2008, 10:38
You can't believe this crap can you!! the rest of the world is having problems but Malta is not, even the property market won't go backwards!! Malta is always different!!
Alexander Brincat
Oct 11th 2008, 10:14
Malta will only lose in this global market indigestion as it has not risked tonnes of cash in high risk investments, as was the situation in the US, and indeed, also in Europe. However Malta is not immune to the crisis, and the extent of any losses will surely be equivalent to those investments in the high risk, and sometimes also low risk (the ones which carried high credit ratings that is), that went bad. Only the banks, the financial institutions, MFSA and the Central Bank know the real extent of potential losses to the economy. As a taxpayer I would rather not know such extent, and only live in the distant hazy hope that people are really working in the top posts and ranks to protect our money. However, to point out are other real risks that migh effect our economy and avoid yet another bubble burst. We can therefore mention the true pricing of products such as food, car fuel and water ans electricity prices, without of course forgetting housing prices. If there is not going to be any automatic or government induced / incentivised reductions in the abovementioned prices, then we are all in for a surpise.
l Galea
Oct 10th 2008, 23:05
@Charles Camilleri
Certainly not, but were it not for economists the world would not be in the present dire situation.
Joe Vella
Oct 10th 2008, 22:30
@ J Bonnici
It is quite ironic that you mentioned Campell Soup in all of this, Cause Campell Soup stock is the only one that have gained in value in this troublsome times.
Gerald Fenech
Oct 10th 2008, 19:37
As usual, the Maltese live in an ivory tower - we always think that the world revolves around us. Apart from the fact that the Malta Stock Exchange lost a considerable amount of its value in the past few days with shares dropping over 10 per cent, it is clear that the financial crisis will create a severe drop in our tourism figures and there will also be the fallback effect from the slowing down of the property market. Although what these economists say is true - the byline beneath the photo is misleading as it implies that the MSE is bucking the international trend which is certainly not the case.
J. Bonnici
Oct 10th 2008, 18:35
Get down from that Disneyworld ride. Prepare your Campbell vegetable soup. Our battering is yet to come.
Charles Camilleri
Oct 10th 2008, 15:07
Are all those below sorry that Malta, thanks to it serious banking system (controlled by the Central Bank and MFSA ) will pass this world financial crisis with only a little scratch???????
In your political blindness you do not even trust Alfred Mifsud who surely is not a nationalist supporter.
P. Camilleri
Oct 10th 2008, 15:00
I sometimes wonder if we are living on the same island....Really can't understand these economists...whilst everyone in the street is complaining and feeling the recession, these so called "economists" try to convince us that what we are experiencing is not the reality.....
Mr. Economists, no matter how much you try to brainwash us with your "feel good factor" agenda, please respect our intelligence, cause people are not "imbeciles"!!!
Louis Gatt
Oct 10th 2008, 13:42
"Malta may benefit from financial crisis" Oh what a nice dream! How I wish this dream comes true. This is indeed a very positive way to see things, but I prefer to be realistic and call a spade a spade. Lets hope and pray that Malta will survive this financial crisis with the least damage possible to our fragile economy. In the meantime having a nice dream will help.
John Portelli
Oct 10th 2008, 11:38
Malta is only surviving the economic crisis because we had millions of hard cold cash entering the banking system in the past year and a half due to the Euro conversion and people had no choice but to bring their money in. Period. Please, don't tell us it's otherwise or it is due to some government plan. The simple fact that hundreds of millions made it to the banks before January is stabilizing the current situation in Malta. However, if the bank continues lending to for those huge consturction projects or lending people money for second homes (in the name of tourism), we will see Malta going the same way as all other western european countries and the US went. This will hit us too, but the hope is that the banks, will be on their toes as wo who and what monies they lend to at these times of crisis. Let's make no mistake about it. Hope that the banks (especially HSBC) are not lending to institutions on the verge of bankrupcy outside Malta.
l Galea
Oct 10th 2008, 10:56
It boggles the mind
It must be the sort of "Only in Malta"
Joseph W. Galea
Oct 10th 2008, 10:35
Here's a thought. Since Malta has such financial regulations why don't our MEPs suggest to Brussels that Malta take over the troubled EU financial management?
Kenneth Zammit Tabona
Oct 10th 2008, 10:31
I am most impressed by this optimism! So once again we Maltese are poised to make a silk purse out of a sow's ear and glean what we can from the biggest and most criminal of financial scams that ever happened! The mentality that Malta is immune from the goings on in the rest of the world must stop. We seem to think that our isolation entitles us to remain inviolate, a virgo intacta, irrespective of what goes on in the world.
When the stream of tourists becomes a trickle then we will see who benefits. Meanwhile our spanking new hospital does not have solar power. That's living in cuckooland for you!