PM sees the recession ending by third quarter
'Recovery would be characterised by slow take-off'
The Prime Minister said yesterday Malta would probably emerge from recession in the third quarter of 2010. Speaking just after an EU summit in Brussels, Dr Gonzi said the situation was fluid but that the government was forecasting that Malta would be out of the official recession "in the second part of next year".
The forecast more or less parallels that of two economists who spoke to The Times about the subject.
The more positive outlook points towards March while the more cautious view sees a turnaround happening around June - in line with the government's prediction.
The economy contracted by 2.1 per cent between July and September when compared to the same period last year, according to figures released by the National Statistics Office on Wednesday.
The July-September quarter is the third negative successive quarter of 2009, confirming the economy is still in recession.
In its last Budget, the government forecast negative growth of two per cent for 2009 with the economy returning to positive territory next year. The Finance Minister predicted growth of 1.1 per cent in 2010 but did not indicate when he expected the turnaround to start.
While some experts say the negative impact of the recession has only started to bite and the worst is still to come, economist Joseph F.X. Zahra is more positive in his outlook.
"I am quite optimistic we will see the economy picking up probably towards the last part of the first quarter and the beginning of the second quarter next year," he said.
Playing down the time-lag factor between what happens in Europe and its impact in Malta, Mr Zahra said the economy was very open and a globalised scenario had drastically shortened the time span between what happened abroad and domestically.
"The communications industry has shortened the time span for both negative and positive developments.
"Though we are vulnerable, if our key tourist source markets start to recover and the economies in our export markets pick up we will experience the benefits," he said, pointing out that signs of recovery had started to appear in France, Germany and the US.
Economist Joe Vella Bonnici adopted a more cautious stance, viewing June 2010 as the "earliest" possible time for a recovery.
"At this stage it is an educated guess because nobody can foresee how the markets will respond but a turnaround is possible towards the middle of next year," he said.
The shopping patterns over the Christmas season and the impending water and electricity bills, he added, played an important role in how things would develop in the months to come.
While consumption in December could offer an indication of the people's mood, the extent of the utility rate increases could determine how long the economy would take to recover.
"We depend on the recovery in Europe but there are also domestic factors unrelated to foreign influences. The woes of the construction industry are worrisome but even manufacturing has been experiencing a downward trend for at least eight years," Mr Vella Bonnici said.
He stressed that even the Central Bank Governor had recently talked about the need to address structural domestic problems.
On one issue both economists are unanimous: the economy after the recession will not be the same as before.
Companies would maintain a cautious and prudent approach to spending, Mr Zahra said, insisting the recovery would be characterised by a slow take-off.