(Adds PM, Opposition leader's comments)
The economy officially entered a recession in the first three months this year after growth slumped by one per cent.
This is the second negative quarter in a row. In the last three months of last year the economy declined by 0.3 per cent after nine months of solid growth.
Figures released by the National Statistics Office this morning show that GDP for the first quarter stood at €1.1 billion, down from the €1.2 billion in the previous quarter.
Household expenditure, exports and imports all registered declines.
Finance Minister Tonio Fenech said that although statistically Malta was in a recession, it was not a reflection of the general economy.
He said negative growth was particularly fuelled by ST Microelectronics’ negative export figures (60 per cent of Malta’s manufacturing exports depend on ST) and the government’s decision to absorb Enemalta’s losses as a result of higher oil prices. In the first couple of months, Enemalta lost €22 million.
He pointed out that the negative growth was not reflected in all economic sectors and insisted the economy was still performing well and creating jobs.
“Government remains attentive and this is why we took the precautionary €40 million budget cuts at the beginning of the year,” Mr Fenech said.
In a statement issued later in the afternoon, the Finance Ministry also said that most economic sectors registered growth. A 4.3 per cent increase in exports was also noted.
The ministry said that Malta’s unemployment rate continued to be among the lowest and that for the creation of employment among the highest.
A total 3.3 per cent increase in wages was paid in the first quarter compared to the same period last year and requests for new jobs increased by 25 per cent, with an average of 60 jobs requested daily.
Earlier, Prime Minister Lawrence Gonzi said there was no denying that these were challenging times.
Malta had an open economy that was reliant on the export market but past results in terms of growth, employment and investment should be of encouragement, he said.
Opposition leader Joseph Muscat tweeted that an economy in recession needed sound decisions and a focused leadership steering it towards growth.
The PL team, he said, had the credentials to deliver.