Unemployment appears to be in freefall and our economy is growing twice as fast as that of the European Union. The EU just gave our economy a clean bill of health in its forecast for 2015. Good news indeed, with little cause for concern, were it not for the fact that other national and European statistics published last week give conflicting messages on the state of certain sectors of our economy.
Between December 2013 and December 2014, the number of people registering for work went down by 1,100 – a significant decrease within the context of the Maltese economy. A reduction in people registering for work is normally an indicator that the economy is performing well. But this drop has to be seen within a context.
According to the latest available statistics, the number of people on the public payroll stands at just over 44,000. This represents an increase of more than 3,000 employees when compared to the average number of public sector employees in 2012, equivalent to an eight per cent increase.
One might point out that, during the same period, employment in the private sector also increased by eight per cent. This is good news but, up to three years ago, the public sector was shrinking while the private sector was growing. Yesterday’s reported appointment of a full-time driver for a part-time chairman is symptomatic of the current state of laissez-faire when it comes to public sector employment.
The increase in public sector employees comes at a price.
More people on the public payroll means more tax money needed to pay their wages. By the government’s own calculations, the total public sector wage bill between 2013 and 2015 is set to increase by nine per cent, or €57 million.
The government is also substantially increasing its operational expenditure and the money being given to public sector entities.
To balance the books and make good for the additional expenditure on public sector wages and other areas, the government is increasing its fees for licences, insurance, exams and certificates across the board. Consumers’ disposable income will automatically be affected, which partly explains why income is now the highest concern of the Maltese.
The drop in unemployment is therefore not totally due to an increase in private sector opportunities. It is partly due to direct government intervention in the job market. This explains why the drop in unemployment, rather than bringing about a drop in the total level of national debt, is actually contributing to a higher amount of debt. Between October 2013 and October 2014, national debt in absolute terms increased by €220 million.
While debt is increasing, the value of exports dropped by €720 million in two years, according to data published by the National Statistics Office last week. This equates to a 16 per cent drop. If one removes fuel from the equation, the drop is still a very significant one, at 13 per cent.
The increase in public sector employees comes at a price
Exports are generally reflective of the performance of our manufacturing industry. The drop in exports is mirrored in the drop registered in our country’s industrial productivity.
NSO figures published last week showed that industrial production in December 2014 decreased by 3.6 per cent compared to the previous year.This was unfortunately not a one-off drop. NSO figures confirm that industrial production has been constantly decreasing nearly each month throughout this legislature.
And the Economic Survey published by the government last October contradicts the claim it is now making that the decrease is due only to a subdued performance of the electronics sector. The Economic Survey indicates drops in various segments of our manufacturing industry, including electronics, pharmaceuticals, printing and textiles.
A worryingly similar trend is felt in the retail trade. Results published last week by Eurostat reveal that while retail trade has increased across Europe, it registered a drop in Malta. And figures published over the last months have shown this decline to be quite constant.
The Finance Minister plays down these results by claiming that the statistics are not reliable, a surprising claim given that the NSO falls under his political responsibility.
But, then, what does he make of the GRTU survey findings published last week, indicating that over 40 per cent of its members have experienced a drop in sales? Or the warning issued also last week by the Forum of Maltese Unions that economic wealth is not being felt by the workers? Are they equally unreliable?
As the Chamber of Commerce, Enterprise and Industry repeatedly tells representatives of the political parties it meets, we can never take our level of competitiveness for granted.
Unfortunately, the commercial interest rates charged by our banks are still too high compared with the rest of Europe. Fuel expenses incurred by industry are significantly higher than in the rest of Europe due to the government’s failure to reduce diesel prices.
Our watchdog authorities are, moreover, failing to ensure that a liberalised market brings benefits to consumers. And while the March reduction in utility rates to commerce will undoubtedly be welcomed, one may question whether it is enough, given that oil is now 60 per cent cheaper than it was two years ago.
The Opposition welcomes the findings of the winter report published this week by the EU and recognises that important parts of our economy, particularly tourism and financial services, are performing well. It is our duty, however, to point out there are other sectors, particularly the retail and manufacturing sectors, that are facing or have the potential to face difficulties in the future.
Despite the cost of undoubtedly being branded negative by Labour, we urge the government to heed this call sooner rather than later. That will help ensure that the forecasted growth will be felt across all sectors of the economy and not just a few.
Mario de Marco is PN deputy leader and shadow minister for finance.