Zero to negative GDP growth likely, Finance Minister admits

Malta's economy this year will see zero or even negative growth, Finance Minister Tonio Fenech said yesterday.

He said Malta was faring much better than most European countries, which were expecting a negative growth of about four per cent.

Malta's economy was already in negative growth in the last quarter of last year and in the first quarter of this year.

The Finance Minister had so far refrained from publicly commenting on the possibility that Malta will end the year in the red, even when negative figures first started surfacing in the beginning of the year.

At the end of May, Central Bank Governor Michael Bonello said it was likely that Malta would end the year "with a marginally negative growth rate", barring unforeseen developments.

Reacting to Mr Bonello's prediction, Mr Fenech had simply said: "We appreciate this news reflects the international reality we are all facing. Instead of standing still, we are working to counter it, not just in the immediate term but in the long-term so that jobs are not lost as a result of the international scenario".

He went beyond that yesterday and, for the first time since the recession hit Malta, he admitted that the year was likely to end in the red.

Addressing journalists following the first consultation meeting with social partners ahead of the 2010 budget yesterday, Mr Fenech said he was aiming for "a delicate budget", which did not disrupt the economy. The economy had to be allowed to grow to address social issues.

Mr Fenech said measures taken by the government ensured that firms continued to operate from Malta. Such measures saved about 2,000 jobs. Unemployment had increased by about 1,000 people but now seemed to level out.

He said the social partners attending a meeting of the Malta Council for Economic and Social Development called for investment in Product Malta, measures to tackle inflation, a cut in bureaucracy and higher productivity.

Speaking about the tourism industry, Mr Fenech said this sector was experiencing uncertainty because of late bookings and, as a result, hoteliers and other operators were not committing to engaging staff for summer.

He explained that the budget consultation process, which started yesterday, was expected to lead to the publication of the pre-budget document in mid-July.

More meetings were planned, starting with one in Gozo today and a business breakfast tomorrow.