The European Central Bank will hold its regular monetary policy meeting in Malta tomorrow. This would be the first time this event by the Frankfurt-based ECB will be hosted here.
Apart from the six members of the executive board – including Mario Draghi, its president – there will also be the 19 governors from the eurozone central banks. Trailing them will be economic and financial journalists from leading media houses.
The Central Bank of Malta will undoubtedly follow in the footsteps of other member states which have already hosted this prestigious meeting and highlight not only the country’s achievements but also its cultural assets. That should pay dividends.
As it happens, the ECB meeting comes in the wake of the downheartening results of the World Economic Forum’s competitiveness study and the red flags raised by the EY Malta Attractiveness Survey.
It will also be taking place amid the debate on the Budget measures announced last week and which starts in Parliament today after both the Prime Minister and the leader of the Opposition gave their formal reactions in the House over the past two days.
The country has managed to avoid the recession that brought down so many others after the global meltdown of 2008. The banking system survived and remains profitable. Employment is robust and inflation, at 1.4 per cent, is still a healthy level – above the negative territory that strikes fear in the hearts of economists and below the two per cent limit which the ECB considers to be the point at which inflation erodes savings rather than stimulates growth.
The asset purchasing programme is also bang on target even though banks in Malta, with their high liquidity, are in an enviable position when compared to their European counterparts.
In the second quarter, annual real GDP growth accelerated to 5.2 per cent, which was even better than the upwardly-revised growth rate of 4.9 per cent in the previous three months.
The 20 per cent devaluation of the euro, which followed the asset purchasing programme, was particularly beneficial to Malta, compared with other eurozone members as we have one of the highest dependencies on exports.
In spite of the higher cost of imports (including petroleum products) on which we depend, it still made our high value added products more competitive and made holidays cheaper for the island’s main tourism markets outside the eurozone, including the UK.
The governor of the Central Bank of Malta, Josef Bonnici, should allow himself a secret smile at the success of his “moral suasion” to pressure banks to narrow the margin between what they charge as interest rates and what they pay.
The ECB governing council met last September and the minutes of that meeting were recently released, noting “it was very important that the governing council found the right balance between, on the one hand, not drawing premature conclusions on the lasting impact of the latest economic and financial developments and, on the other hand, recognising that downward risks had clearly increased”.
While Malta benefits from more competitive exports, the slowdown in emerging markets is having a negative impact on demand, shaking up commodity prices and other trade patterns. The ECB council noted that economic activity in the eurozone had still not recovered to 2008 levels and investment remains far below pre-crisis level.
What a refreshing change for this tiny economy to remind itself that, in spite of all that we so rightly criticise and complain about, there is truly still much to be thankful for and strive to retain.