It is natural that Prime Minister Joseph Muscat should take credit for the country’s upbeat economic and financial figures. The economy grew by 6.3 per cent last year and the rating agency Fitch, in its latest assessment, expects 3.6 per cent moving forward. The four per cent unemployment rate is the lowest in the eurozone. The fiscal deficit has fallen to 1.5 per cent of GDP and rating agencies expect the debt-to-GDP ratio to drop below 60 per cent over the next few years.

In Finance Minister Edward Scicluna, Dr Muscat appears to have a steady hand on the tiller. A number of factors have contributed to the positive performance so far. The Labour government has to a large extent maintained the same economic direction as the Nationalist government before it, while its move to reduce utility tariffs has increased consumers’ purchasing power and boosted business competitiveness. At the same time, an effort has been made to reduce bureaucracy.

The financial services sector has been performing remarkably well, real estate is robust and tourism has received a significant boost from the terrorism and turmoil in some of Malta’s neighbouring destinations. Throw into the mix the sharp decline in the price of oil and the elements are in place for a strong economy.

Even as it pats itself on the back, however, the one thing the government must not do is rest on its laurels. It is imperative that efforts be made to diversify the economy in the face of risks to continued growth.

In tourism, competition is bound to increase as stability returns to other destinations, while a calamity on our shores can never be ruled out. Financial services face the possibility of losing tax advantages in the drive towards EU harmonisation. Gaming companies could leave the island in a matter of days if alternative jurisdictions offer a better corporate tax regime.

With the exception of the controversial, yet successful, Individual Investor Programme, where Maltese passports are sold to the super rich – and which has raised some legitimate concerns in both Malta and the EU – this government has not concentrated enough on encouraging and identifying new and sustainable forms of economic stimulus.

On the contrary, there is an overreliance on unnecessary mega projects and the construction industry to boost the economy. The recent approval by the Planning Authority of the 38-storey Townsquare tower in Sliema is a case in point. The pro­ject can only be described as greed gone mad, and the fact that there are many other similar projects in the pipeline is extremely worrying in terms of the potential for a bubble to be created. Excessive development may also one day catch up with our tourist industry. Who would want to visit a country that has become a permanent building site?

There are other factors that could threaten our economy, such as the government’s poor record in good governance. The fact that Konrad Mizzi and Keith Schembri are associated with the Panama Papers scandal has tarnished Malta’s image and poses a threat to the financial services industry. The resignation of Manfred Galdes, the director of the Financial Intelligence Analysis Unit, at a time when important investigations were taking place over the Panama revelations, has set alarm bells ringing.

The fact that Malta has had five different police commissioners since 2013 does nothing to boost the rule of law, which is a crucial element in attracting foreign investment. And many of this government’s appointments of public officials have been terrible choices, with political loyalty, rather than competence, being the determining factor.

Such a trend has no place in a modern advanced market economy and risks doing lasting damage to it.

A solid economy is actually a fragile thing that should never be taken for granted.

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