Attacking the recession
Bad news usually travels faster. The National Statistics Office released the Gross Domestic Product data in the second week of March. Though the NSO said not a word about it in the short commentary accompanying the figures, the data showed that Malta...
Bad news usually travels faster. The National Statistics Office released the Gross Domestic Product data in the second week of March. Though the NSO said not a word about it in the short commentary accompanying the figures, the data showed that Malta went into recession in the second half of 2008. Ironically that coincided with much official marvelling that our economy had so far seemed cushioned against the downturn in economic activity gripping much of the rest of the world.
Sadly, that still is the way things are done here. Instead of focusing on the reality around us too many of the official squadron prefer to keep their head in the sand, encouraging the people to do the same. The outlook was bleak enough in the second half of last year to indicate that we too were in the grip of a downturn.
As usually happens, that did not take place in all the sectors of the economy. According to the NSO, growth in value added was generated in transport, storage and communication; financial intermediation; real estate, renting and business activities; public administration; education and health. Increases, said the NSO, were also registered in wholesale and retail trade, quarrying and construction and remote gaming.
And thank goodness for that. However, the last four months of 2008 showed that tourism was in decline from the previous bumper year. And tourism, as the Governor of the Central Bank recently reminded us, has a high multiplier effect. The provisional estimates for the full year confirmed that there was a drop in value added by the tourist industry. Other sectors also to record growth were agriculture, fishing and manufacturing, "in particular," said the NSO in its only implied comment, "the manufacture of electrical and optical equipment". Electricity, gas and water supply also declined.
The question now is what 2009 will bring along. We already know that tourism has continued to nose-dive. Manufacturing too, judging by the drop in domestic exports. On the other hand, we also know that financial intermediation and remote gaming are still going strong, with new investment enquiries trickling in. And again, thank goodness for that, though with the growing clamp down on money seeking where to hide we have to be more careful than ever whom to welcome in those sectors.
That Malta cannot escape the ravages of the global recession is a simple fact. Less simple to digest is the other fact that the situation will get worse, and that sectors not too badly affected during the first two quarters of recession, the second half of 2008, are unlikely to escape some or a lot of pain as the current year unfolds.
It would be useful to keep this probability in mind, rather than for government sources to continue to beat the drum of past successes. Economic management looks forward, not backwards.
That is why the government is trying to help on a one-to-one basis manufacturing companies hit by the recession, but with a potential to recover when the economic cycle turns.
That is a positive approach, though it remains to be seen whether it will work - ultimately what determines the hoped for out-turn is the level and quality of global demand for the output of the assisted companies. The parallel approach, to continue to marvel that this or the other sector have not also sunk under, is a waste of time and energy. Success stories should be recognised, certainly, to show that it is not all bleakness out there and that there remain opportunities to exploit and new ones will be thrown up.
Yet, rather than unnecessary rhetoric, what the economy needs is focus on those areas where a gentle push could help to sustain activity, which would be good in itself and as an offset to sectors which will inevitably decline.
For example, Mepa remains under the spotlight mainly in respect of the much touted reform now that the Prime Minister is responsible for it; as well as in regard to large projects. The reform has been in the pipeline for a full year. It is about time that the mountain gave birth, and hopefully it will not be to a ridiculous mouse.
It is also time to recognise that small, if not always beautiful, can be particularly good at a time when activity is weak. For instance, Mepa must have on its plate a number of applications from relatively small contractors and developers for construction of warehouses and garages. The schemes in their regard are clear enough. If processing is done at a reasonable pace, permits could be issued which would provide work for the construction industry.
The NSO data show that sector as one experiencing growth in 2008. Anecdotal evidence, however, suggests that construction too is in the throes of a growing slowdown. It could do with a boost here and there, which could come from a more brisk, though no less careful, assessment of applications in hand.
Recession tends to lipo-suck the fat away very quickly, and also to eat into economic muscles, and rapidly at that. Whatever countervailing action could be taken should not be left idling unduly. That applies too with processing of all sorts of applications to government departments and other authorities.
At this stage of the economic cycle it is more than ever important to ensure that response time is as fast as it could safely and sensibly be so that whatever countervailing action can be taken is not held back by the heavy hand of bureaucracy.
Sadly, that still is the way things are done here. Instead of focusing on the reality around us too many of the official squadron prefer to keep their head in the sand, encouraging the people to do the same. The outlook was bleak enough in the second half of last year to indicate that we too were in the grip of a downturn.
As usually happens, that did not take place in all the sectors of the economy. According to the NSO, growth in value added was generated in transport, storage and communication; financial intermediation; real estate, renting and business activities; public administration; education and health. Increases, said the NSO, were also registered in wholesale and retail trade, quarrying and construction and remote gaming.
And thank goodness for that. However, the last four months of 2008 showed that tourism was in decline from the previous bumper year. And tourism, as the Governor of the Central Bank recently reminded us, has a high multiplier effect. The provisional estimates for the full year confirmed that there was a drop in value added by the tourist industry. Other sectors also to record growth were agriculture, fishing and manufacturing, "in particular," said the NSO in its only implied comment, "the manufacture of electrical and optical equipment". Electricity, gas and water supply also declined.
The question now is what 2009 will bring along. We already know that tourism has continued to nose-dive. Manufacturing too, judging by the drop in domestic exports. On the other hand, we also know that financial intermediation and remote gaming are still going strong, with new investment enquiries trickling in. And again, thank goodness for that, though with the growing clamp down on money seeking where to hide we have to be more careful than ever whom to welcome in those sectors.
That Malta cannot escape the ravages of the global recession is a simple fact. Less simple to digest is the other fact that the situation will get worse, and that sectors not too badly affected during the first two quarters of recession, the second half of 2008, are unlikely to escape some or a lot of pain as the current year unfolds.
It would be useful to keep this probability in mind, rather than for government sources to continue to beat the drum of past successes. Economic management looks forward, not backwards.
That is why the government is trying to help on a one-to-one basis manufacturing companies hit by the recession, but with a potential to recover when the economic cycle turns.
That is a positive approach, though it remains to be seen whether it will work - ultimately what determines the hoped for out-turn is the level and quality of global demand for the output of the assisted companies. The parallel approach, to continue to marvel that this or the other sector have not also sunk under, is a waste of time and energy. Success stories should be recognised, certainly, to show that it is not all bleakness out there and that there remain opportunities to exploit and new ones will be thrown up.
Yet, rather than unnecessary rhetoric, what the economy needs is focus on those areas where a gentle push could help to sustain activity, which would be good in itself and as an offset to sectors which will inevitably decline.
For example, Mepa remains under the spotlight mainly in respect of the much touted reform now that the Prime Minister is responsible for it; as well as in regard to large projects. The reform has been in the pipeline for a full year. It is about time that the mountain gave birth, and hopefully it will not be to a ridiculous mouse.
It is also time to recognise that small, if not always beautiful, can be particularly good at a time when activity is weak. For instance, Mepa must have on its plate a number of applications from relatively small contractors and developers for construction of warehouses and garages. The schemes in their regard are clear enough. If processing is done at a reasonable pace, permits could be issued which would provide work for the construction industry.
The NSO data show that sector as one experiencing growth in 2008. Anecdotal evidence, however, suggests that construction too is in the throes of a growing slowdown. It could do with a boost here and there, which could come from a more brisk, though no less careful, assessment of applications in hand.
Recession tends to lipo-suck the fat away very quickly, and also to eat into economic muscles, and rapidly at that. Whatever countervailing action could be taken should not be left idling unduly. That applies too with processing of all sorts of applications to government departments and other authorities.
At this stage of the economic cycle it is more than ever important to ensure that response time is as fast as it could safely and sensibly be so that whatever countervailing action can be taken is not held back by the heavy hand of bureaucracy.