Economy and reform set to dominate agenda in 2009

The management of the economy is set to dominate the country's agenda this year as Malta tries to fight the effects of the global recession and the aftermath of the international financial crisis. The eurozone is in recession, and so are the UK, Italy, Spain, Germany and the United States, all important trading partners of Malta, which is bound to have an impact on the Maltese economy.

Although the new US administration which takes office later this month offers some hope for a global economic recovery, most analysts don't expect an upturn before 2010 with many predicting that the situation in 2009 will get worse before it gets better. Malta's main challenges this year include continuing to diversify its economy so as not to rely too much on a narrow range of economic sectors, to try to broaden its tourism markets so as to make up for the expected decline in the number of tourists from the UK due to sterling's fall, to strengthen certain success story economic areas such as financial services, and to increase the country's competitiveness in order to make it more attractive for foreign direct investment.

Controlling the fiscal deficit is another challenge the government will have to face this year. The deficit soared to €271 last November, €71 million more than was projected for the end of the year. Originally, the government planned to end 2008 with a deficit of €68.4 million or 1.2 per cent of GDP. However, in the November budget, Finance Minister Tonio Fenech revised the figure upwards to €200 million or 3.5 per cent of GDP and blamed the derailment on extraordinary expenditure on fuel costs and the Malta Shipyards' early retirement schemes. With pressure on the government to increase its expenditure as a way to create economic growth (forecast for 2.5 per cent in 2009), it certainly won't be easy for the government to reach its projected fiscal deficit target of €98.8 million (1.6 per cent of GDP) in 2009.

The privatisation of Malta Shipyards, the reform of the public transport sector, the reform of Mepa and the introduction of the new utility tariffs are all expected to dominate the headlines this year. The government has kept quiet about who has expressed an interest in buying the shipyards and it will be interesting to see exactly what plans the new owners have for the 'yards. Expectations are high among the public for the reform of both Mepa and public transport and the government will be under pressure to bring about real change in both these areas. Cosmetic changes will certainly be greeted with scepticism by the electorate.

Now that the new utility rates have been set by the government, the public will be anxiously waiting to receive their first revised bills this month. These bills, together with the precarious global economic situation are bound to have a negative effect on consumer spending - this has reportedly already happened over the Christmas period.

This year also witnesses the merger of the Chamber of Commerce and Enterprise and the Federation of Industry into the Malta Chamber of Commerce, Enterprise and Industry, a historic and important development on the local business scene. The newly merged organisation should lead to a stronger - and unified - voice for the private sector in Malta.

Politically, the government faces two electoral tests this year - local elections in March and European Parliament elections in June - the first contests since Prime Minister Lawrence Gonzi and the PN were re-elected last February. These elections will also be a major test for the Labour Party's leader, Joseph Muscat, who replaced Alfred Sant last June. The country's economic situation is expected to be a major factor in determining voters' intentions.

In April a new President has to be chosen by Parliament to replace Eddie Fenech Adami. It will be interesting to see whether the government decides to nominate somebody from the opposition, or from outside Parliament, or both.