“The government has no indication of a looming recession. On the contrary, we have strong indications that the Maltese economy will continue to grow steadily”. If, less than a month ago, the Brussels-based correspondent of The Times quoted our Minister of Finance correctly (March 20) then we should be worried. There is sufficient uncertainty around and such statements do little to assure investors and people alike.
The government’s attempts not to taint its image (whatever is left of it) is bordering on the ridiculous- Joseph Vella Bonnici
In my article The Outlook Remains Negative I wrote that “the government is projecting a growth rate for 2012 four times higher than the estimated rate for growth in the eurozone. How wise is it for the government to adopt such a bullish approach? What will be the fiscal consequences if this growth rate is not reached?” (November 22, 2011).
Despite advice from various international authorities, such as the EU and the IMF, the minister based his estimates for Budget 2012 on a 2.3 per cent growth rate.
When the EU obliged the government to review its budgetary projections, the minister kept insisting that this was purely a precautionary measure.
Last April, in this column, I wrote that “of course, given the track record over these last four years they (the fiscal targets) will not be achieved” (April 10). Now, the government tells us that the 2012 growth forecast has been revised downwards to 1.5 per cent.
How can the government tell us that it “had no indication of a looming recession”? Has the minister forgotten that, since last September, Moody (twice) and Standard & Poor’s (once) have downgraded Malta’s government bond rating expressing a negative outlook?
GDP statistics for Q1/2012 published by the National Statistics Office confirm that our economy is in recession. And, guess what? The minister wants to convince us that what Malta is going through is a new economic phenomenon: “statistical recession”. Maybe the minister can explain how this differs from any other recession.
The government’s attempts not to taint its image (whatever is left of it) is bordering on the ridiculous. To err is human but to persist is diabolical. Just like when the minister tried to convince us about the higher interest that Malta would earn from lending money to the Greeks. Later, he was quoted as stating that “he took comfort in the fact that Malta was not too exposed to Greece directly” (The Sunday Times, May 20). Now, Malta stands to lose up to €112 million and relatively has the highest exposure (estimated at 4.3 per cent of GDP) to Greece’s exit from the eurozone.
It is about time that the government stops treating us as morons; about how thankful we should be that we are so much better off. Perhaps, some of us are. But, once again, statistics tell a different story. Over the last decade, the purchasing power of Maltese employees has been stagnant and the gap with the average eurozone income continued to widen in the first quarter of 2012.
Perhaps, the minister can bother to explain what has led to a significant fall (4.4 per cent) in household consumption? Perhaps, it is about time that the government brings in an expatriate to run our Ministry of Finance.
The government put the blame for the “statistical recession” on the drop in exports by STMicroelectronics and the government’s absorption of Enemalta’ s rising oil costs. Why did the minister decide to point a finger at the global corporation? Are its 1,500 employees just a “statistical detail”?
The minister is right in claiming that the government’s decision not to increase the electricity tariffs impacted negatively on GDP. Is this the economic growth that Malta needs? Little wonder that there is disconnect between the government and the people.
What is equally worrying is that Malta’s dip would have been even worse were it not for the continued increase in government spending. This implies that the private sector is in a worse situation than the one per cent shrinkage of the economy would indicate. It also raises serious doubts about the ability of the government to reach the set budgetary targets.
As the president of The Malta Chamber of Commerce, Enterprise and Industry had warned, “the primary concern for Malta lies with the sustainability of our growth forecasts” as “this would risk leading the country into stagnation and into a dangerous vicious circle” (February 16). This should concern the governor of the Central Bank much more than “statistical fuzziness” and changes in inventories (The Sunday Times, June 10).
Of course, there is no harm in the Central Bank looking into the way that Malta prepares its statistics. There is always a lot that can be learnt from such an assignment. My hope is that it will not be just an exercise to back someone’s political agenda. It should go beyond trying to prove that our economy is in a recession or otherwise.
There are many other deeper, structural issues that need to be addressed such as the degree to which foreign direct investment is contributing to higher productivity, which sectors are contributing to higher value activities and the amount of income that remains in our economy.
Malta deserves a healthy, objective debate about the challenges and opportunities facing our economy. Statistics are a tool that can facilitate such a debate but too much meddling goes to prove how right Disraeli was in referring to “lies, damned lies and statistics”.
fms18@onvol.net