After nine months of solid growth last year, the economy contracted by 0.1 per cent in real terms in the three months to December, according to provisional figures released by the National Statistics Office.
Data released yesterday indicated the economy started slowing down in the second half of 2011, entering into negative territory, even if marginally, by December.
This puts Malta on the brink of a technical recession, which is determined by two successive quarters of negative growth.
Finance Minister Tonio Fenech was not wholly surprised by the figures, noting that the government had constantly pointed out that the international situation had taken a turn for the worse in the last quarter of 2011.
“This has impacted a number of sectors, particularly exports, but a closer look shows that the main areas of our economy are still registering growth including financial services, real estate and the retail sector,” Mr Fenech said when contacted.
This was reflected in stable job levels, he added, with employment levels increasing also in the fourth quarter.
According to economist Joe Vella Bonnici, the downturn must not be overemphasised but it was not a good sign.
“Coming after three quarters of strong growth, a contraction like this should serve as a warning sign that not everything is going well,” he said when contacted.
It was this downturn that the International Monetary Fund and the European Commission could have foreseen when they asked the government to cut its expenditure by €40 million, he added.
But Mr Fenech said the partial review of public sector budgetary allocations for this year was intended to place the country in a better situation to “counteract any impact which may arise as a result of increasing risks in the international economic situation”.
He said that last week’s decision to absorb the increase in the international price of oil rather than pass it on to consumers was a result of this situation. “The government has taken the stand that it would not be in the interest of our families and industry to increase tariffs.”
The marginal downturn had little impact on the annual real GDP growth rate, according to the NSO. The economy in 2011 grew by 2.1 per cent when compared to the previous year.
Wholesale and retail trade, financial and insurance activities and real estate were the primary contributors to growth last year.
On the negative side, construction experienced a drop in gross value added as did the electricity, gas and air conditioning supply sector.