The negative effects of the international economic recession are starting to be felt in Malta. This is evident from a lower level of business and consumer confidence, from the results that have been announced by companies listed on the Malta Stock Exchange, from the economic data published by the National Statistics Office, from the reduction in the number of tourist arrivals, from what has been reported in the media about the larger manufacturing firms and from anecdotal evidence on certain economic activities.
Yet, I believe that the impact is still contained because so far we have not had the type of job losses that have been experienced in other countries.
There is a general agreement that the depth of the current international recession is unprecedented. What analysts disagree about is the duration of this recession and the solutions that are required. There is the belief that the US will be out of the recession first; however, there isn't agreement as to when that will happen. Neither is there agreement as to whether the Obama cure will work. The two questions that are often asked are: "When will the situation stabilise?" and "When will we experience growth again?". Irrespective of the answers that are provided, as a country we need to address the situation.
Our economy has benefited greatly from the process of globalisation, as more and more of the jobs that have been created in the last years are dependent not on the local market but on what happens beyond our shores.
The small size of our economy is an asset in that it allows us to exploit certain specific niches. We cannot take this success for granted and this is why we must seek solutions to our own particular situation, within the context of the recession in the world out there.
To my mind it is as if we are at a crossroads and we need to make sure that we choose the right path out of the recession. It is in this regard that I believe that the answer to the question posed in the title of this week's contribution is a definite yes.
Yes, we have been there before. Not because we have experienced the type of international recession that we are having to face now, but because we have been at the crossroads before.
In the 1960s we were faced with the dilemma as to whether our economy could thrive after gaining independence from the UK.
In the 1980s we were faced with the dilemma as to whether to go down the process of liberalisation of the economy or whether to adopt highly protectionist policies.
In this decade we were faced with the dilemma as to whether EU membership is beneficial to our economy or not. Soon after we were faced with the dilemma as to whether we should adopt the euro or not as our currency.
The decisions we have taken (that is gain independence, liberalise the economy, join the EU and adopt the euro) have all proved themselves to have been the correct ones for our economy.
On all these issues there was controversy. On what solutions to adopt to address the challenges posed by the current international recession, there seems to be no controversy. Last week I wrote about the government's decision to adopt the micro approach, but no one has really come up with any alternative policy.
This does not mean that we are not at a crossroad, as the wrong approach might prove to be too costly and would weaken the economy in the long term to the extent that we would not be able to exploit the new opportunities that are bound to present themselves once the international economy picks up momentum once more.
The country's economic agenda can no longer be dominated by water and electricity bills or by the VAT on the registration tax of imported cars. We need to shift the agenda on to the policies to pursue to safeguard the jobs that we have and to create new ones.
This is why we are at the crossroads once more. History shows that this government's policies have been the correct ones whenever we have been at the crossroads in the past.