GDP statistics offer analysts the possibility to analyse in detail the country’s economic developments which have taken place in a given year. Keeping in mind that the latest release is by definition highly provisional since it is based on preliminary estimates which can be revised when more and better data becomes available to the National Statistics Office (NSO), some interesting insights and questions emerge, nonetheless.
First, the rate of economic growth in Malta during 2014 has been very strong, at 3.5 per cent.
This compares favourably both with respect to previous years’ growth rates but more strikingly when compared to the economic difficulties faced by many of Malta’s main trading partners.
This positive news should not, however, eclipse the fact that some sectors are not enjoying the same rate of growth. Indeed, one can speak of a dual-speed economy. In real terms, exports declined in 2014 when compared to 2013. This followed a similar drop which took place the year before.
Does this evidence a trend decline suffered by some particular exporters or is it a temporary downturn as a result of the weak foreign economies? While the performance of the tourism sector seems to be very positive, judging by the positive figures over the past year, it seems that this was insufficient to fully compensate for the drops in other export-oriented activities.
Another interesting observation to note is the strong contribution played directly by the public sector, with government consumption growing by over 7 per cent annually in 2014. This is necessarily a temporary acceleration, as otherwise public finances would suffer, going forward.
Higher investment, which in real terms shot up by 14 per cent, was also significantly impacted by the large public sector capital projects underway (though the exact split is impossible to determine based on the GDP news release).
The quality of statistical collection in Malta has improved significantly in recent years
On the other hand, the feel-good factor, supported by the reduction in utility tariffs and the benign labour market developments contributed towards sustaining household final consumption expenditure, which kept the steady upward trend observed over the years.
When digging through the many numbers contained in the GDP release, one discovers some other less obvious – but nevertheless interesting – pieces of information which merit some explanation. For example, despite the impression given by many that our financial sector has been a source of growth in recent years, the sector actually acted as a drag on growth with the gross value added (in nominal terms) of the financial and insurance activities experiencing a decline in 2013 and a further decline in 2014.
The quality of statistical collection in Malta has improved significantly in recent years, primarily as a result of the fact that Maltese statistics now form part of the European statistical collection process and these necessarily have to reach the high standards required by Eurostat.
However, for the sake of transparency, it would be useful if analysts were given a clearer picture of important factors driving economic developments. Can the NSO give us some estimates as to how the fight against tax evasion has boosted GDP statistics?
Can the NSO explain how the adoption of the new methodology (ESA 2010) contributed to the growth rates in recent years? For example, the news release published in August 2014 pointed to real GDP growth in 2012 as being 1.1 per cent, while the release published in March 2015 points to real GDP growth in 2012 at 2.5 per cent.
This means that economic growth was much faster than had originally been published. If a similar revision were implemented in other countries it would definitely made headlines.
If we want to educate readers to better analyse and interpret GDP statistics, more information is needed. This is also particularly important since despite the overall very positive headline GDP growth figures, there still seems to be some underlying challenges facing a number of sectors.
Indeed, the elevated levels of non-performing loans reported by banks in Malta are a reminder that the country still has a number of challenges to face, despite the favourable outlook for growth.