Contradictions and positives in 2010

In various regards this outgoing year has been one of considerable contradiction. One cannot expect things to move at the same speed in the socio-economic sector. But the imbalances and mismatches of 2010 have been such to draw attention to sharper focus in economic planning and execution.

The most glaring mismatch, to my mind, lay in that between the recovery from the recession and consistent albeit somewhat erratic growth in the Gross Economic Product, and the perceived level of poverty. GDP in real terms has now been on an upward trend for several quarters. It did not rise fast enough to catch up with better times in the past, and barely so to make up for output lost in the recession.

Yet it did grow, at faster rates than a number of fellow members of the European Union, who also have been coming out of the recession. That growth was contradicted by continuing weakness in real disposable income. The fact that the PN electoral promise to slash income tax if re-elected in 2008 was spectacularly broken does not come into it.

Had it been kept, disposable income would have been higher, obviously. But one is comparing like with like. A more glaring contradiction with the recovery in economic growth lies in the fact that one report after the other speaks of increases in the perceived level of poverty in our islands.

The Prime Minister has responded to that by saying that the reports are only based on perceptions. Statistics based on actual measurements of economic indicators give a different result, he asserts. While at it he might also observe that the perceived poverty and GDP reports do not actually refer to the same periods. The poverty reports lag the Gross Domestic Product Statistics.

That has to be taken into account. And it is true that perception does not inevitably correspond with reality. Nevertheless there are other signs that the poor certainly remain with us. They are there in terms of relative poverty – the disparity in incomes is growing stronger rather than diminishing. The National Statistics Office is doing a good job, supplying a stream of economic indicators and, mostly so, on time. The main exceptions are the data on the gainfully occupied population and the unemployment rate, for which the NSO depends on the Employment and Training Corporation, which protests its own purportedly unavoidable reasons for not being up-to-date enough.

Even so we could do with more up-to-date social statistics, particularly on income distribution. Statistics aside empirical evidence provided by social workers like Fr Victor Grech And Fr Hilary Tagliaferro tell us – and the Prime Minister – unequivocally that poverty is indeed on the increase, even in absolute sense, meaning that there are those who do not even enjoy the basic necessities of life.

A contradiction closer to economic operators is that retailers in general claim that their sales are far from buoyant. Anecdotal evidence suggests that was also a feature as the year closes, with Christmas shopping below last year’s level at a considerable number of outlets selling products across the board, from hampers, toys, other children’s presents to clothing for all ages. A widespread comment is that the footfall in the main areas of Sliema, to take the main example, has been high, but far fewer of those who ventured into the shops dipped their hands into their pocket to buy.

The main recovery in economic activity occurred in the tourist sector. Numbers up to November were up. So were bed nights and the spend per tourist. Even so, hoteliers report that they were unable to restore the margins they had to shave close to the skin over the past three years. One might argue that here too there is a lag – competitiveness has to be restored (with reduced prices) for numbers to go up. Profitability will catch up later.

The trouble is that later – as near as the coming year – looks set to come along with fresh difficulties. Of our main markets Germany is doing well, as the retail boom of the past week has confirmed.

Elsewhere, austerity measures will begin to bite, at times savagely. That is particularly so in the UK. The steadiness of the pound sterling against the weak euro currency might offset the potential contraction in demand for holidays abroad, if it holds. But the bigger factor could well be the impending shrinkage in disposable income for millions of Britons.

Another contradiction in this sector is home made. The government, through the Parliamentary Secretary for Tourism and the MTA, are busting a gut to project Malta to counter potential adversity in our main markets.

Yet, over here we still get foreign visitors and recently settled expatriates joining the old chorus of those disgruntled with the upkeep of our once beautiful islands.

As for the sectors contributing to the GDP growth, the construction sector remains one of the main ones going in the opposite direction.

There are results to drink to overall. But, the economic planners had better not drink too much.

Best wishes for a New Year full of health and peace to the editorial staff and my readers.