EU predicts difficult year for the economy
The year 2009 will not be a good one for the economy, not only in Malta but across the 27 EU member states, according to new economic forecasts published by the European Commission earlier this week. The new projections show that overall Malta should...
The year 2009 will not be a good one for the economy, not only in Malta but across the 27 EU member states, according to new economic forecasts published by the European Commission earlier this week.
The new projections show that overall Malta should manage to be in a much better position than the majority of its EU partners, particularly those in the eurozone.
According to the new forecasts, published twice a year, Malta's economy next year is still expected to grow by 2 per cent, much better than the 0.1 percent predicted for the euro area and 0.2 per cent for the whole of the EU.
The forecasts, prepared by Commission economists, show that while economic growth in the EU this year should be 1.4 per cent, half what it was in 2007, it will drop even more sharply in 2009 before recovering gradually to 1.1 per cent in 2010.
The Commission's autumn forecasts show that the EU economies are being strongly affected by the financial crisis, which is aggravating housing-market correction in several economies at a time when external demand is fading rapidly. As a result, employment is set to increase only marginally in 2009-2010 after the 6 million new jobs created in 2007-2008, and unemployment is expected to rise by about 1 per cent over the forecast period after being at its lowest for more than a decade.
The only positive indicator emerging from the new forecasts concern inflation, which should continue its downturn observed in the second half of this year.
In fact inflationary pressures are diminishing as oil prices fall, and the risks of second-round effects fade away. According to the Commission the price of oil, which is severely affecting Malta's public finances, should be stabilising at $86 a barrel during 2009.
The forecasts predict that global growth will slow markedly to 3.7 per cent this year and 2.2 per cent in 2009 after the exceptionally strong 5 per cent average in 2004-2007.
Advanced economies will be most affected but emerging economies are also increasingly being hit.
During 2010 growth is expected to rise gradually as financial markets stabilise, thereby supporting confidence and trade.
Investment will also be facing a particularly abrupt slowdown, reflecting the impact of multiple shocks: a weakening demand and a marked drop in investor confidence, tighter financing conditions and a reduction in credit availability.
EU consumption is set to stay subdued in these uncertain times, even though real disposable income growth is set to rebound as the inflationary impact of higher commodity prices fades.
Net exports are projected to contribute positively to GDP as imports are set to slow more than exports, partly benefiting from the recent depreciation of the euro real effective exchange rates.
The European Commission warned that this forecast is surrounded by considerable uncertainty and downside risks, warning that the financial stress could still intensify last longer or have a more pronounced impact on the real economy, fuelling the negative feedback loop.
The new projections show that overall Malta should manage to be in a much better position than the majority of its EU partners, particularly those in the eurozone.
According to the new forecasts, published twice a year, Malta's economy next year is still expected to grow by 2 per cent, much better than the 0.1 percent predicted for the euro area and 0.2 per cent for the whole of the EU.
The forecasts, prepared by Commission economists, show that while economic growth in the EU this year should be 1.4 per cent, half what it was in 2007, it will drop even more sharply in 2009 before recovering gradually to 1.1 per cent in 2010.
The Commission's autumn forecasts show that the EU economies are being strongly affected by the financial crisis, which is aggravating housing-market correction in several economies at a time when external demand is fading rapidly. As a result, employment is set to increase only marginally in 2009-2010 after the 6 million new jobs created in 2007-2008, and unemployment is expected to rise by about 1 per cent over the forecast period after being at its lowest for more than a decade.
The only positive indicator emerging from the new forecasts concern inflation, which should continue its downturn observed in the second half of this year.
In fact inflationary pressures are diminishing as oil prices fall, and the risks of second-round effects fade away. According to the Commission the price of oil, which is severely affecting Malta's public finances, should be stabilising at $86 a barrel during 2009.
The forecasts predict that global growth will slow markedly to 3.7 per cent this year and 2.2 per cent in 2009 after the exceptionally strong 5 per cent average in 2004-2007.
Advanced economies will be most affected but emerging economies are also increasingly being hit.
During 2010 growth is expected to rise gradually as financial markets stabilise, thereby supporting confidence and trade.
Investment will also be facing a particularly abrupt slowdown, reflecting the impact of multiple shocks: a weakening demand and a marked drop in investor confidence, tighter financing conditions and a reduction in credit availability.
EU consumption is set to stay subdued in these uncertain times, even though real disposable income growth is set to rebound as the inflationary impact of higher commodity prices fades.
Net exports are projected to contribute positively to GDP as imports are set to slow more than exports, partly benefiting from the recent depreciation of the euro real effective exchange rates.
The European Commission warned that this forecast is surrounded by considerable uncertainty and downside risks, warning that the financial stress could still intensify last longer or have a more pronounced impact on the real economy, fuelling the negative feedback loop.