The economy entered into recession in the first three months of the year after it contracted for the second time in a row, official figures showed yesterday.
A contraction of one per cent in the three months to March saw the economy shed €95 million, according to the National Statistics Office. The statistical agency also revised the growth figure for the last three months of 2011 as the economy performed worse than was initially recorded.
In December, the economy contracted by 0.3 per cent and not by 0.1 per cent as recorded in the NSO’s March news release.
The negative result in the first quarter was characterised by a drop in exports, imports and household expenditure. The value of exports decreased by €116 million, while imports dropped by €87 million in value. Household consumption also shrunk by almost €61 million.
A recession is technically defined as two consecutive quarters of negative growth.
The economy was last hit by a recession in 2009 in the wake of a financial crisis that sent shockwaves around the world.
Finance Minister Tonio Fenech acknowledged that Malta was in “a statistical recession” but he insisted that most sectors of the economy were still performing well.
He said the economy’s poor performance was a result of a temporary drop in exports by microchip giant STMicroelectronics and the government’s absorption of Enemalta’s rising oil costs.
Mr Fenech said the microchip maker, which accounted for 60 per cent of the country’s exports, had dragged down the manufacturing sector that otherwise performed well.
“The government remains attentive but the key sectors are showing growth and jobs are still being generated,” he said.
Labour finance spokesman Karmenu Vella said the figures contrasted with the government’s portrayal of an economy that was performing well. “The government believes its own rhetoric and ignores repeated warnings by the International Monetary Fund, the European Commission and the Central Bank of Malta,” Mr Vella said. If the government did not admit there was a problem, he added, it would not be able to find the right solutions.
Alternattiva Demokratika chairman Michael Briguglio said that decisions had to be taken to end the economy’s “overreliance” on construction and real estate.
“Malta should adopt a green new deal to ensure that economic, social and ecological objectives are met,” Mr Briguglio said.