Recession hitting all eurozone
Although Malta's economy is not among the worst in the 16-member eurozone, a new quarterly report issued by the European Commission in Brussels yesterday shows that the European economy is under pressure and that the recession is taking its...
Although Malta's economy is not among the worst in the 16-member eurozone, a new quarterly report issued by the European Commission in Brussels yesterday shows that the European economy is under pressure and that the recession is taking its toll.
According to the report, eurozone activity contracted by 1.5 per cent on a quarterly basis in the last quarter of 2008, and with the exception for inventories and government consumption, all GDP components were down, with investment exhibiting the sharpest drop of -3.7 per cent .
The situation in the labour market deteriorated significantly, with 450,000 job losses in the fourth quarter and the unemployment rate at eight per cent. World trade is being severely hit by the collapse in global demand which is increasingly also affecting emerging economies.
Malta also suffered a contraction last year, with the latest Eurostat statistics showing a slight -0.1 contraction in the third quarter. On the other hand, unemployment levels are still significantly lower than the euro area average although at 3.5 per cent, the island's inflation rate in February was the highest.
On a more positive note, the report states that developments in energy and commodity prices are providing some support to households' purchasing power. Falling commodity and energy prices together with base effects have indeed led to a steep decline in inflation in the eurozone, with headline inflation coming down sharply to 1.2 per cent in February. Lately, there have also been signs of stabilisation in some confidence indicators both for the euro area and the global economy.
The Commission's analysis however, states that it is too early to see the full effect of the significant stimulus measures put in place by the EU and its member states, including the free play of the powerful automatic stabilisers, the measures to stabilise the financial sector and the easing of the monetary policy.
The Commission said that, after some improvement at the end of 2008, the crisis in financial markets intensified again at the beginning of 2009 as the deterioration in the real economy took its toll on financial market sentiment. This was reflected in falling stock prices, as well as widening credit and market spreads. Loans to the private sector have moderated considerably, reflecting sluggish household credit and first signs of deleveraging in the non-financial corporate sector.
Although some markets have recently shown some signs of improvement, conditions in the financial sector remain extremely fragile.
The Commission said that the current economic crisis highlights the need for broader and more in-depth macroeconomic surveillance within the eurozone.
According to the report, eurozone activity contracted by 1.5 per cent on a quarterly basis in the last quarter of 2008, and with the exception for inventories and government consumption, all GDP components were down, with investment exhibiting the sharpest drop of -3.7 per cent .
The situation in the labour market deteriorated significantly, with 450,000 job losses in the fourth quarter and the unemployment rate at eight per cent. World trade is being severely hit by the collapse in global demand which is increasingly also affecting emerging economies.
Malta also suffered a contraction last year, with the latest Eurostat statistics showing a slight -0.1 contraction in the third quarter. On the other hand, unemployment levels are still significantly lower than the euro area average although at 3.5 per cent, the island's inflation rate in February was the highest.
On a more positive note, the report states that developments in energy and commodity prices are providing some support to households' purchasing power. Falling commodity and energy prices together with base effects have indeed led to a steep decline in inflation in the eurozone, with headline inflation coming down sharply to 1.2 per cent in February. Lately, there have also been signs of stabilisation in some confidence indicators both for the euro area and the global economy.
The Commission's analysis however, states that it is too early to see the full effect of the significant stimulus measures put in place by the EU and its member states, including the free play of the powerful automatic stabilisers, the measures to stabilise the financial sector and the easing of the monetary policy.
The Commission said that, after some improvement at the end of 2008, the crisis in financial markets intensified again at the beginning of 2009 as the deterioration in the real economy took its toll on financial market sentiment. This was reflected in falling stock prices, as well as widening credit and market spreads. Loans to the private sector have moderated considerably, reflecting sluggish household credit and first signs of deleveraging in the non-financial corporate sector.
Although some markets have recently shown some signs of improvement, conditions in the financial sector remain extremely fragile.
The Commission said that the current economic crisis highlights the need for broader and more in-depth macroeconomic surveillance within the eurozone.