Last week the National Statistics Office issued the data for the gross domestic product for the first quarter this year. The data showed a growth in real terms (that is after accounting for inflation) in the economy of 1.4 per cent over the first quarter of 2001.
The percentage growth over the first quarter of 2000 was of 1.6 per cent, while the growth over the first quarter of 1999 was of 9.3 per cent. If one were to take a 12-month figure (that is, the last three quarters of 2001 and the first quarter of 2002) and compare it to the previous 12 months, one would have a shrinkage of 0.5 per cent.
Where is the good news in all of this, if there is any? The last 12-month data we had showed a shrinkage in real gross domestic product of 0.8 per cent over the previous 12-month period.
Moreover, the quarterly data had showed a reduction in real gdp of 2.2 per cent in the fourth quarter of last year when compared to the fourth quarter of 2000. Thus the latest data indicates a change of trends.
One cannot compare the first quarter of this year with the last quarter of 2001 as there is an element of seasonality in the quarterly figures that is very evident in the historical data published by the NSO.
The reduction in GDP last year was the result of a slowdown in the international economy that hampered growth in our key productive export-orientated activities - manufacturing and tourism. The international economy is now showing signs of recovery, even if not particularly strong ones, and a slight positive impact has been immediately felt. There are also signs that the domestic economy is buoyant, irrespective of what some may claim.
Consumers' expenditure increased by over six per cent when compared to the first quarter of last year, while investment in construction increased by seven per cent.
A worrying feature is that investment in machinery was down in the first quarter of this year to 1999 levels. However, the perception here is that companies would like to expand their operation on the strength of their existing stock of investment thus recovering their outlay before moving on with other investment initiatives.
Exports of goods and services are down when compared to last year but are slightly up over 2000. Thus, the effects of the international slowdown are still being felt even if in a much reduced way. This is why the positive impact that we have had on gdp can only be described as slight.
We have also had a change in the composition of the gross domestic product when analysed by the different economic sectors. Some of these changes do not reflect previous trends, thereby indicating an evolving situation that is likely to go through some further changes.
For example, manufacturing had increased its contribution to gdp for three successive years to reach a level of 25.57 per cent. It is now at 23.13 per cent. This again reflects the uncertain international situation with the result that higher value added manufacturing is contributing to a lesser extent than lower value added manufacturing.
It is developments like these that suggest that one asks the question (as in the title of this week's contribution) rather than make a definite statement.
It is also worth noting the experience of other countries that have an economy similar to ours, namely small in size with no home market and no natural resources, and therefore reliant on the exports of manufacturing goods produced and of services provided. Singapore, Hong Kong and Taiwan are good examples to take, also considering that they are often quoted as major competitors of ours in the field of foreign direct investment and as countries that we should emulate.
The fact is that in the first quarter of this year, when compared to the previous year, Singapore experienced a drop of 1.7 per cent in its gdp, Hong Kong experienced a drop of 0.9 per cent, while Taiwan had a growth of 0.9 per cent - all three have had a performance worse than ours.
In my opinion, given that the international economy is still in a state of flux for various reasons, including political factors, our economy would be expected to remain so as well. This would mean that the individual components of the gross domestic product would not show any specific trends that are necessarily consonant with each other. However, one factor continues to emerge - the resilience of our economy.
The economy demonstrated this resilience last year, when the international economic slowdown was at its worst, and it is showing it now while there is still a huge element of uncertainty in our major markets and the nature of the economic recovery in these markets is not so well defined.
In the long run, this resilience provides us with a solid foundation for future growth and it is this resilience that will help us to go back to the growth rates in gdp experienced up to a couple of years ago.