Just as the International Monetary Fund has raised some optimism over the global prospects, economic and political developments in Europe have whipped up fresh concerns in the eurozone.
Italy has now followed Spain in pushing back its balanced budget target and, nearly five weeks after the presentation of the budget in Britain, ministers have been told to identify other potential cuts in the bid to deal with the country’s debts.
The Dutch government has resigned following disagreement over a package of austerity measures and the possibility that Socialist candidate Francois Hollande could win France’s presidency has raised concern.
All this, and more, make the situation in the eurozone even more fluid than it has already been for quite some time. Greater difficulties in the euro area also mean the generation of new uncertainties that could even affect Malta in some way or other. In fact, according to the latest IMF outlook report, another crisis is possible in the eurozone and that most major economies “still face brakes on growth”.
On the positive side, however, the IMF is predicting a slightly faster growth in the rest of the world.
Unsurprisingly, the part of the IMF report dealing with Malta kicked off the usual political spat between the two main parties, with Labour hitting out at the government for projecting an unrealistic growth rate at the time it presented the financial estimates for this year last November.
On the other hand, the Nationalist Party in government accused Labour of trying to turn what it considered as a positive forecast for Malta into something that was negative. Worse, it also accused the Labour Party of doing this to discourage investment.
The IMF is projecting Malta’s growth this year at 1.2 per cent and the Central Bank of Malta, at 1.6 per cent, way down from the government’s 2.3 per cent forecast made in the budget for this year.
To Labour’s charge of incompetence, the Finance Minister said the economy was set to grow at a faster rate than that of its competitors. There is no end to the attacks and counter-attacks that the two parties lash out at each other practically every time a report about Malta’s economy is published, leaving many bewildered by the sharply contrasting situations they present.
The truth though is that, contrary to situations in other countries, Malta is not faring all that badly. It may not reach the growth rate projected in the budget but, at least, the country is still registering growth. In fact, the 1.2 per cent rate forecast by the IMF is slightly higher than that projected by the European Commission in its autumn-spring forecast, published in February, and also higher than that forecast by Ernst & Young earlier this month.
The European Commission had forecast a growth rate for Malta of one per cent and Ernst & Young, a rate of 0.9 per cent.
Brussels had said that its revision of the growth forecast primarily reflected the slowdown in the euro area.
Bringing down, to an acceptable level, the national debt, now standing at 72 per cent of GDP, will not be easy but the government is managing to reduce the deficit, which means lower interest rate payments on the debt.
Problems of course abound and political controversies are set to increase the more the election approaches. Hopefully, however, this will not deflect the country’s attention from seeing to matters that can help bring about more development, such as the restructuring of inefficient government systems.