It is hard to work up a sweat over the European Commission’s Winter Forecast for the island. Real growth was 5.4 per cent in the third quarter and is forecast to stand at 4.9 per cent for the year as a whole, admittedly not the figures China and India have been reporting, but still quite a respectable pace – especially within the EU.
Other performance indicators are just as heartening: low unemployment staying around 5.4 per cent for the year, export growth recovering, healthier deficit and debt levels, and inflation creeping back up to around its target of two per cent.
The problem is that when the headlines are positive, quarter after quarter, apart from the dry, understated forecast becoming predictable and even boring, it risks pushing up to rest on our laurels.
And there are few red flags in the forecast: a sharp decline in EU funds as a new programming period gets underway, for example, but even this was balanced out by the upside risk of more financing coming through the Investment Plan for Europe, and the long-awaited setting up of a development bank.
There is only one line, buried deep in among all this feel-good stuff, that warns of potential trouble ahead: a downside risk should protracted weakness in emerging markets hamper the recovery of exports, “given Malta’s large exposures to trading partners outside the EU”.
Alas, would that the risks were so easily summed up. We are a small island almost entirely dependent on the world beyond our shores. We are buffeted by the butterfly effect, the elegant part of chaos theory that explains why a small change at one end of a story can result in much bigger changes at the other. Take property: Malta went from having an oversupply that was worrying the sector to a focus on getting foreigners to buy the surplus, to suddenly finding demand was growing for rentals, which prompted yet another flurry of purchases and developments to cater for it. And yet, no one has stopped to ascertain whether this bandwagon is already overloaded, and whether demand is already tapering off.
Beyond our shore, we have to consider Brexit and sterling and their impact on our tourism market. We have to consider the price of oil and commodities. We have to consider Zika and the possibility it will negatively affect tourism – or that the panic will fizzle out after its 15 minutes of front page fame.
We have to consider the impact of Irisl at the Freeport, mergers and acquisitions in insurance locally and pharmaceuticals internationally, and the setting up of free trade zones and new logistics operations. We need to cross our fingers that the new gaming legislation will truly ‘futureproof’ the gaming sector and that office projects will materialise sooner than later, before potential investors start to get frustrated. We have to pray that the discovery of possible Mafia links last year does not turn out to be the tip of an iceberg that could seriously tarnish our reputation. We have to pray even harder that ISIS and terrorism do not shed blood on our shores.
We should be looking at previous European Commission forecasts, which flagged the aging population and the pensions gap, poor tax compliance and tax evasion, road congestion and energy dependency. Some things are being tackled but will the desired results be seen soon enough?
The European Commission’s forecasts are but one way of checking the island’s pulse. We can only hope that economic stability does not turn out to be as solid as the concrete pillars at Mater Dei Hospital.