Recovery after recession

The hike in water and electricity rates was the last thing businesses and employees needed and recovery in the new year will be arduous. Business and union leaders look back on a year of recession and look forward to 2010.

Helga Ellul - president, Malta Chamber of Commerce, Enterprise and Industry

The main downturn was registered in the manufacturing sector with a more subdued fall in the services sector. But the speed with which shifts took place may be illustrated by the drop in business confidence from a very satisfactory, buoyant expectation for 2009 to an outright negative out turn this year.

While it is nowhere near that recorded in recent years, the business sentiment is positive for next year. Turnover, sales locally and abroad, employment and investment are seen growing on balance. They are comparatively modest in terms of those projected last year but, in the circumstances, this fact is encouraging.

It means that business is taking stock, considering its expectations, but seems prepared to resume moving forward. It could well be that businesses are cautious in reviewing their plans for 2010, and therefore, their envisaged values for turnover, sales, employment and capital growth in 2010 lack an enthusiasm normally associated with optimistic entrepreneurial spirits; 2009 represents a sudden break from the momentum that has been building in recent years and is being followed by a 'prudent' 2010.

In spite of the slight recovery, the economy is still very fragile, particularly due to our dependence on external forces in our open economy. The first half of 2010 will still be difficult and in the recessionary phase, but the outlook of the second half is more positive.

In these circumstances, our economy cannot take shocks such as the utility rates, announced just weeks after agreeing to the highest ever cost of living increases. These rates will only prolong recession and fuel inflation, leading to further demands for a higher cost of living adjustment in 2010. In this scenario, business will find it very difficult to be competitive.

Vince Farrugia - director general, GRTU

After the Budget of 2009, the GRTU appealed to the government to be bold in approaching the challenges the economy faced. We insisted with the Prime Minister that funds should be earmarked to business that was dependent on export and international competitiveness. If that investment was lost, it would be impossible to replace it post-recession.

The GRTU also advised the government to vote more funds towards tourism marketing. We would have liked government to have done more but the fact that carriers maintained their levels prevented the industry from collapsing.

The government also assisted SMEs through various schemes. Unfortunately, the schemes came into effect belatedly and some others are still in the pipeline, like the micro-credit and tax credit schemes. Malta Enterprise's internationalisation programme is working well. Unfortunately not all firms are realising that the business world will be tougher and more competitive after the recession. This is the time to re-structure.

In 2010, all the fuss about inflation and consumer protection will be outdated. Inflation will go down and the scenario will be different. The competitive structure of the market economy will change, and firms will go under and re-emerge as new or restructured. Unemployment will not go down especially as the government very erroneously loaded small firms with water and electricity tariffs that are too tough.

There seems to be a lack of co-ordination between ministers about what the economy's priorities are. If there is more co-operation, the first months of 2010 - with the support of the new Budget schemes - will help maintain employment at Budget 2009 levels. Too many people in government are sitting pretty not realising the challenges of the economic situation. As result, we will not achieve success in the first months of the year, but after June all of us will realise what the challenges are. The economy will close next year with a more competitive structure. GDP will not grow but the economy will be stronger.

George Micallef - president - Malta Hotels and Restaurants Association

This year we experienced drops across the industry, tour operator packages, and the MICE sector suffered the most. Restaurants also experienced a significant drop in revenue. By the end of 2009, the hotel sector would have lost around €54 million in revenue, with a drop in occupancy of 14 per cent, and a drop in the RevPAR (revenue per available room) of 25 per cent. This hit the bottom line hard and we estimate that the hotel sector alone will register accumulated losses in excess of €26 million after depreciation and finance costs.

Tourism is likely to lag recovery in the national economy in 2010, and it will probably not be before Q3 when we begin to see some signs of recovery.

The industry is still very price-sensitive. For 2010 we have no choice but to totally absorb the increase of the cost of living adjustment which was among the highest in recent years. We are also expected to absorb the increase in utility rates, which have been upped by a staggering 50 per cent, together with other increases in our operating costs. There is no way that we can recoup any of this and we are extremely concerned about the tariffs, as these will potentially cripple the entire industry. The government needs to offer some respite to industry.

This is a time for action. Stakeholders should hold firm through these challenging times ahead and to focus on the core objectives: Maintain and grow seat capacity, support Air Malta, maximise load factors through effective marketing, focus on basic product fundamentals, prioritise key tourism zones, initiate a branding exercise, increase effective market intelligence, and to ensure sufficient access to finance.

Pierre Fava - president, Malta Employers Association

The fact that we have not been as badly hit as other economies is no coincidence. It has been the result of prudent financial institutions; limited but targeted government assistance packages to companies in trouble; and a general attitude by employers who preferred to 'wait out' the recession before resorting to redundancies. As a result, our real GDP has contracted by two per cent and our unemployment levels are in the region of seven per cent which is less than the EU average. Of concern is the inflation rate which was partly fuelled by ill-timed increases in utility tariffs, which in turn triggered further cost push inflationary pressures, whose effect will still be felt during next year.

It is anticipated that Malta should experience a mild recovery during the latter half of 2010. The order books in many manufacturing companies are picking up and in some cases, may reach pre-recession levels in the coming months. There are also some interesting investment projects that are expected to generate productive jobs, plus a number of EU-funded infrastructural projects which will pump money into the economy without the need to increase government debt.

It remains to be seen to what extent the projections for better fortunes in our major markets will result in a recovery in our tourism sector, given that it will still take some time - probably years - for employment levels to improve. This will be an important factor in determining how fast we can steer our economy towards growth again, and at what rate.

Tony Zarb - secretary-general, General Workers Union

While governments in other countries did their best to revive their economy, Malta's government did the opposite when it introduced new utility tariffs, restricting economic recovery and worsening the situation.

When in 2008 the international crisis was already on the horizon, our government did not show any foresightedness and did not heed the advice given to stimulate the economy. Instead, it went on to add the burden on families and industry when it increased the utility tariffs.

The GWU worked hard and constantly with managements and government to alleviate the difficulties of those companies, which more than others, needed assistance. It was thanks to the GWU that the government started to aid these companies through EU funds. With this proposal, the GWU defended the interests of workers and their families as numerous jobs were saved, and also the interests of the industries employing thousands.

The utility tariffs which take effect tomorrow will surely have a negative impact on people. Regrettably, the government's decisions are encouraging everyone to work alone, rather than with the social partners.

The new year will be a difficult one. The GWU believes that problems can be overcome if all share in the burden according to their ability and not by burdening the workers with more than they can bear. The GWU cannot accept what employers want, that COLA will not be given to all workers and that it would be tied to production and not to inflation.

The GWU will continue to be prepared to work with all towards solutions by remaining at the forefront in defending the interests of workers, pensioners and their families. By doing so, it will be protecting the national interest.

Gejtu Vella - secretary general, Union Ħaddiema Magħqudin

The current year began on the wrong footing with a breakdown in effective social dialogue between the three social partners. With recession looming, the worst happened. Rather than amassing the other two social partners in meaningful social dialogue, efforts and energies to combat the situation to ensure that the effects of recession were marginal and limited, and the government played stubborn.

The UĦM predicts that in 2010 the recession will eat away a portion of our economy and jobs. However, the new initiatives set in the Budget for 2010 should encourage local and foreign businesses to invest and engage new employees. This should keep unemployment in check and at the lowest levels possible.

Economic, political and industrial stability remains very central during the coming 12 months. In this regard, the government should not introduce any new fiscal measures not announced in the Budget.

The establishment of an agency by which prices can be monitored and corrected, if necessary, should build consumer confidence and increase spending patterns.

Likewise, the rate of inflation should be scrutinised and kept in check. Inflation should not be allowed to erode the earnings of workers and pensioners due to market inefficiencies.

All projects and infrastructure initiatives announced in the Budget should get underway as early as possible with a view to fuel economic activity.

In 2010, communication and information remain of utmost importance. On the other hand, meaningful social dialogue between the three social partners remains pivotal to bring about the changes if and when necessary, and to adjust our small and open economy to the new international financial and economic order.

Hopefully, by the end of 2010, Malta's 2015 Vision may well move into top gear again.