Last Saturday’s election turned in a different government, with a majority that was unprecedented in our history. The rational political analysis still has to be made, and, in any case, it is not the objective of this contribution to undertake such an analysis.
However, whereas elections mark the end of one legislature and the start of another one – with the possible change of government (as happened this time) – they do not change in any way the economic landscape of the country. The economic life of a country is very much a continuum and the challenges we were facing eight days ago are the same we are facing today and these will evolve in line with national and international developments.
The new Government’s economic agenda still has to developed beyond the electoral manifesto. On the other hand, the local and international economic scenarios are given and need to be managed. They need to be managed proactively for two main reasons.
First are the developments within the EU. Directives, initiatives, regulations, etc within the EU do not wait for anyone. So our attention on any sort of EU developments needs to be maintained at a maximum.
The second are the decisions taken by global companies that have a presence in Malta. Again elections are not factored in their decision-making process. These decisions present us with opportunities which need to be exploited and with threats that need to be countered.
The requirements of macroeconomic management are known but need to be restated. It is difficult to put them in some form of order of priority as they may all be equally important.
Maintaining healthy public finances is a key challenge. We have not yet reached the stage of balancing the budget. However, the EU has more than once stated that we are getting closer to that goal and has even stopped from pursuing the excessive deficit procedure against our country.
A different government may have a different view on how to allocate resources. However, the need to balance the budget remains as it has been for a number of years.
There is also the challenge of job creation. We all agree that when we speak of job creation, we need to speak of productive employment. In this area, we have done better than other countries. This has occurred through a mix of positive developments.
The development of new activities has generated employment, and equally, companies present in Malta (some even for decades), have invested further and created new jobs. Maltese companies have also invested and created jobs thanks to various forms of support that were offered to them.
The challenge to create new jobs is always there and the dynamics of the economy are such that a number of jobs get lost. The only way we can keep unemployment low is by making sure we create more jobs than we lose.
Linked to the issue of job creation is the challenge to achieve export-led growth. This phrase has been used in this country for decades because it has always been recognised that our economy can grow only if it exports its good and services.
This results in an injection of funds into our economy that in turn generates economic growth which eventually feeds into more employment and, in turn, feeds into greater government revenues. Initially, it was mainly manufacturing and tourism that generated our export-led growth. Now we have a diversified economy and several sectors make their effective contribution.
Finally, there is the challenge of inflation. I do understand those persons who look at the effect of inflation on the purchasing power of people. However, we cannot ignore the effect of inflation on our costs of production. Inflation that is above the rate experienced by our competitors or our customers could render economic activities carried out in this country unprofitable, with consequences on public finances, employment and investment.
As a country, we have always had to live with these challenges, irrespective of who was in government. They remain the same even for the Government that has just been sworn in. And for everyone’s sake, we should all wish that we continue to overcome these challenges.