The Central Bank of Malta’s quarterly review is one of the most encouraging signs of economic stability this year, according to economist Karm Farrugia.
“This is extremely positive news, especially coming from the Central Bank, a politically independent institution. While the rest of the EU is down with the flu, we have been given a clean bill of health,” he said.
Published on Saturday, the review included the latest Labour Force Survey which found both unemployment and employment had risen while the labour force had continued to grow.
Mr Farrugia said this showed the attractiveness of the local jobs market. The labour force, he said, was increasing mostly because non-registered unemployed were being enticed to join the labour force.
“This shows how appealing the jobs market is. There is a mass of skill in the labour force and it is hidden latently. This will hopefully continue to grow,” he said.
While the rest of the EU is down with the flu, we have been given a clean bill of health
The figures showed an increase of three per cent in the number of workers on the island and a growth of 3.5 per cent in the jobs market. The increase in workers followed a smaller rise of 1.7 per in the previous three-month period.
Meanwhile, the unemployment rate rose to 6.7 per cent from 6.5 last year.
Mr Farrugia insisted, however, this was also a positive sign.
“This shows that our market is attracting semi-skilled, skilled and professional workers and as a result our market is expanding,” he said.
The forecast, completed last month, showed that overall economic generation was expected to rise until the end of this year and again next year.
In its review summary, the bank said it expected GDP to accelerate to more than 1.8 per cent by the end of the month. That figure should then rise further to two per cent in 2014.
Inflation was expected to fall to one per cent by the end of the year, only to rise back up to 1.4 per cent in 2014.
On a more cautionary note, the bank warned the government against the dangers of not controlling the budget deficit.
“The government should ensure that it achieves its budgetary targets and thus corrects the excessive deficit as soon as possible,” it said.
Interestingly, the bank said it expected economic growth to stem mostly from exports. Last month, however, the EU statistics arm Eurostat revealed that Maltese exports had fallen more than in any other EU country. In fact, between January and August exports were reported to have fallen some 20 per cent.
Although there was never a government explanation for the notable decrease, National Statistics Office figures suggest a shift in the island’s oil purchases could be to blame. The figures had shown exports falling some €407 million, primarily due to mineral fuels.
The bank also noted that banks remained “resilient”, but said that these could afford to lower lending rates.
“Margins between bank lending rates and deposit rates are high when compared to those in stronger euro area countries, suggesting these could be lowered,” the bank said.
This, it argued, would facilitate access to finance for Maltese firms and support investment competitiveness and growth.