The recent spate of economic news emerging from the National Statistics Office continue to confirm that the key issues facing our economy are being addressed quite effectively. This does not mean that we are out of the woods, nor does it mean that we are unaffected by what happens beyond our shores. It only means that the steps that are being taken to tackle certain issues that, if left not tackled, could prove to the long-term detriment of our economy, are bearing fruit.

I am specifically referring to the issues of the fiscal imbalance, the balance of payments (the external balance) and unemployment. They are three issues that are closely related and any healthy economy that grows at sustainable rates needs to have these three variables in order.

An unsustainable fiscal imbalance would eventually have to be addressed through increased taxation; thereby reducing the growth potential of the economy. A deficit in the balance of payments would nibble away at our external reserves; thereby reducing our potential to import.

Unemployment has a direct dampening impact on our gross domestic product. Whichever way you look at it, these three economic variables need to point in the right direction for Malta to be in a position to enjoy steady economic growth.

With regard to the fiscal imbalance, the data for the period January to August confirms the trend experienced for the first six months of this year. Although government expenditure has increased during the first eight months of this year when compared to the same period in 2003, it still accounts for just 61.8 per cent of the expected budget forecast, with 66.6 per cent of the year gone. Total expenditure in the first eight months of 2003 represented 66.9 per cent of total final expenditure for that year.

A continuance of this trend in the four months from September to December of this year would mean that total expenditure would be something like Lm70 less than budgeted.

One can claim that there may be an element of seasonality in expenditure. And this may well be so considering that public sector accounts are still drawn up on a cash basis. However, it is equally worth noting that, as at August 2003, total expenditure was at 66 per cent of the budgeted expenditure.

Therefore, the gains made this year seem to be more a result of an element of control.

A sour note still remains, however, with regard to revenue. This has increased over last year but is still lagging against budget. It needs to be stressed once more that if we meet budget in terms of revenue and make the gains on expenditure reduction that are being prospected at this stage, the problem of the fiscal deficit would disappear into thin air.

The balance of payments are also showing a significant improvement this year when compared to last year. For the first six months of this year, the balance on the current account shows an improvement of Lm23 million, from - Lm67 million to - Lm44 million. The goods account shows an improvement of Lm37 million while the services account shows an improvement of Lm6 million. The income and transfers accounts show a deterioration of Lm20 million. What is significant is that the improvement of the goods and services accounts is a direct result of increased productive activity, while the movements of the income and transfers accounts reflect a movement of monies more than anything else.

The news on unemployment is also positive. The most recent data is that for August of this year. The normal cycle of unemployment is such that unemployment falls between October and May and rises between June and October.

This links with the influx of school leavers into the labour market. In times of economic uncertainty, one may have a discontinuation of this trend as happened in the first six months of this year when unemployment fell only marginally.

In August of this year, unemployment (as registered by the Employment and Training Corporation) fell when compared to July of this year and fell as well when compared to August of 2003. This goes against the expected the trend of rising unemployment in the summer months. It is also worth noting that the number of registered as unemployed in August 2004 was lower than that in December 2003, clearly indicating a renewed ability of the economy to create jobs.

These various pieces of economic news only highlight short-term positive trends. They do not in any way indicate a long-term positive situation. However, these positive trends can be consolidated in the medium term if we manage to capitalise on the various opportunities that are being created and manage to control our expectations such that firms operating in Malta remain competitive. This is why the news that we have to date is very encouraging.