Editorial

It has just been announced that the US, the world's largest economy, has registered a 3.5 per cent economic growth in the third quarter, after the longest period of recession since the Great Depression. The International Monetary Fund also revised its forecast for Asian economic growth sharply upwards. At last, there is justifiable reason to be cautiously optimistic about the world's economic future.

The impact of such a strong economic performance in the US will slowly, but surely, be felt in other world economies, including Malta. This tiny island has one of the most open economies and any movement in economic growth in Europe and the US will have a direct impact on its performance. One hopes that, as the European economies' growth gains momentum, Malta too will experience a bigger demand for its goods and services.

Some economic analysts still doubt whether the world economic recovery will be a v-shaped rather than a w-shaped one. But there are many who agree that the fiscal stimulus applied by some governments, including that of the US, will ensure that this turnaround will be sustainable.

It is generally acknowledged that it is not just schemes like "cash-for-clunkers" that is behind this recovery. In fact, this week it was also announced that consumer confidence in the US is returning as evidenced by a 3.4 per cent growth in real terms in overall consumption.

Malta is likely to start feeling the effect of this positive turnaround in the middle of next year as international clients start to build up their stocks to cater for a surge in consumer demand. Similarly, European workers will start feeling more optimistic about their jobs and will increasingly plan to, once again, travel to countries like Malta for their holidays.

The government will soon be announcing its plans and forecasts for 2010. The Minister of Finance, who has so far been very careful to manage expectations, is likely to announce measures that will be underpinned by cautious optimism about prospects for the coming year. Beyond the political rhetoric, one would expect affordable confidence-building measures to ensure the economy bounces back to steady, even if modest, economic growth.

It is too easy to be dangerously euphoric about the positive developments in the world's leading economies. After one of the world's worst economic performances in the last century, millions of jobs have disappeared, several families have lost their homes because they could not repay their mortgages and the quality of life of countless others has taken a nosedive. Malta did not fare as badly but it still has formidable challenges to upgrade its economic performance.

A very pragmatic President Barack Obama, reacting to the latest economic growth news, stated that his own benchmarks for economic strength included "whether we are creating jobs, whether families are having an easier time paying their bills, whether our business are hiring workers and doing well".

Most economic analysts agree that the fly in the ointment of this world economic recovery is likely to be the fact that, this time round, economic growth is unlikely to generate sufficient jobs to make up for those lost over the last two years.

It is in this context that many await to see how ambitious and creative the Maltese government will be in the coming budget to tackle the issues of economic growth, improving competitiveness and stimulating job creation.