Economic rebound was stronger than expected
Brussels expects deficit to increase again by 2012
The European Commission has described Malta’s emergence from the global recession as “stronger than expected”, saying the island had managed to be among the eurozone countries that suffered the least harm to their economies.
Giving details of the progress made this year and forecasting the scenario until the end of 2012, the Commission’s Autumn Economic Forecast gives an upbeat picture albeit with some exceptions, particularly in the way of inflation.
It says the strong pick-up in exports this year has been the main contributor to the island’s economic performance in 2010, leading to employment growth that was “faster than the labour supply”. GDP growth rate was one of the strongest in the eurozone.
The first half of 2010 witnessed a stronger than expected rebound in economic activity. Year-on-year real GDP growth until the second quarter is estimated to reach four per cent, mainly resulting from a strong rebound in external demand.
“The steep increase in exports, primarily of machinery, was only partly offset by the increase in imports, of mainly industrial supplies. Domestic demand, however, remained more subdued,” the report says.
At the same time, while the economy is expected to keep performing above the EU average over the next two years, Brussels is forecasting a slower pace of growth. This, it says, is due to a less buoyant outlook for the external environment, also related to the phasing out of the recovery measures in a number of EU member states as well as a stronger euro.
With one of the lowest unemployment rates in the EU, Brussels expects no real change over the next two years, with the rate expected to hover around 6.6 per cent.
On the negative side, inflation is expected to remain higher than the EU average, mainly driven by the price of energy and food. The Commission’s analysis notes that: “Food inflation is again expected to become an important contributor to inflation, given the assumed increase in global food commodity prices over the forecast horizon.”
The increase in excise duties on alcohol and tobacco announced in the last Budget is also expected to have a relatively strong impact on processed food inflation, according to the Commission.
With regard to utility tariffs, the Commission says these have highly characterised inflation in Malta in recent years since the subsidies on electricity and gas were eliminated.
“The recent commitment by the government to keep electricity tariffs in 2011 fixed at the 2010 rate will help to partly compensate for the expected pick-up in fuel prices, which are affected by the announced increase in excise duty. In 2012, energy inflation is expected to be driven again by electricity given the expected reversal of the measure implemented in 2011.”
The government is seen to be in line to achieve a deficit of under three per cent of GDP by the end of next year, although the debt ratio is expected to remain high and possibly increase.
The Commission is however sceptical about the government’s projection of an even lower deficit in 2012: “Based on a no-policy change assumption, the deficit is anticipated to widen again to 3.3 per cent of GDP (in 2012) mainly due to the projected lower impact of one-off measures and still-substantial increases expected in capital spending, although partly financed with EU funds.”
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Victor Vella
Dec 1st 2010, 13:40
In computer jargon GIGO-Garbage in garbage out. This is the fodder that Gonzi regime gives to Brussels. How can we have economic rebound when the GDP is shrinking. Unemployment figures can be manipulated by not adding the number of underemployed persons that are increasing.. It could be that next year will increase substantially. How can economic rebound be feasible when the government has not succeeding in restraining the prices? When prices of essential commodities such as water and electricity, fossil fuel and gas are increasing, the consumers` demand will decrease and the quantity of goods and services will decrease as well. So, where is the rebound? This regime thinks that he is dealing with idiots . Gonzi is surrounded by complacent incompetent mediocre retinue. The economic rebound was stronger than expected because the oppressed have to pay for the failures of the regime, while the oppressors are singing christmas songs in the lavish of the wealth they have stolen from the oppressed.
Joey Grech
Nov 30th 2010, 16:33
Yesterday's article included this bit (which for some reason or rather has been left out today): ''As households' disposable income and consumer confidence are expected to improve further due to the anticipated better labour market conditions, private consumption growth is set to accelerate.'' This was just irresponsible wishful thinking that is not based on actual facts. Perhaps it was for this reason that that particular bit of nonsense was removed from today's version! For how on earth can the Minister of Finance - and the E.U. backroom boys expect that Maltese households' disposable income and consumer confidence will improve? the ongoing employment of part-timers surely won't help! As for the latest COLA that was a big reprehensible JOKE. The E.U. has shown that it is inefficient - it has become also scandalously irresponsible churning out reports that are not supported by actual facts. Only one thing concerns the officials at the E.U. - their huge salaries. They will do anything to make it look as if the E.U. is serious, competent and upright. It is not so I'm afraid.
l fenech
Nov 30th 2010, 15:45
Economic rebound hassewa, tas-600 Euro, tal-160,000 tax free u ta 'Brussels.
C Cassar
Nov 30th 2010, 14:37
The Maltese never accept when they are better off than most, even when it's staring them in the face. Malta has one of the most robust economies in Europe. To see the worst, take a look at the UK and Ireland.
J.Bonnici
Nov 30th 2010, 13:20
Imma kemm ha ndumu nidhku bin-nies? Il-Kummissjoni ukoll kienet tghid li l-Irlanda miraklu ekonomiku imma kien miraklu ibbazat fuq is-self u l-bejgh ta' propjeta'. Fuq il-karta kollox kien jidher tajjeb; mur araha issa l-Irlanda. U l-pajjiz taghna ukoll hekk ha jigrilu. Qed jeghreq bl-interessi fuq id-djun li ghandu u ma jista' qatt jirpilja bil-mod kif inhu miexi ghax qed jonfoq hafna iktar milli qieghed idahhal. Toqghod tahseb dwar x'jista' jigri jaqbdek il-bard.
tony fava
Nov 30th 2010, 11:55
TISKANTA KOLLOX HARIR. U WARA IL-POPLU JINGHATA 1 EURO 16 ZIEDA. U GONZI PN U IL-MINISTRI TIEGHU HADU 600 EURO BAXX BAXX. IL-KONTIJIET BAQAW GHOLJIN HAFNA U IL-GVERN JIDDEJJEN KEMM JIFLAH. DIN SIEHEB TAL-POWER STATION. MA NAFX MINN L-EU FEJN IGIB IL-FATTI. U HAWN KWAZI KWART MILL-POPLU JGHIX VICIN JEKK MHUX TAHT IL-POVERTY LINE.MA NISTAX NIFHEM IMMA MA TRIDX TKUN GENJU. OVVJA LI QED JERFAW KOLLOX GHAL-ELEZZJONI.
victor caruana
Nov 30th 2010, 10:11
'With one of the lowest unemployment rates in the EU' !!!!!!
Hekk jonqos, ma nkunux the lowest when we have to lowest labour participation rate (50% only) in the eu if not in the western world.
Mark Galea
Nov 30th 2010, 12:29
kull ma jonqos huma ftit pariri ta' Joseph Iceland Muscat.
J.Scicluna - Rabat
Nov 30th 2010, 13:46
@Mark Galea
WRONG!
You meant Lawrence "Ireland" Gonzi!
Biex tiskongra trid tkun pur!
Mark Galea
Nov 30th 2010, 20:10
we can also say Joseph Cyprus Muscat !!
Please choose the reason of your report below: