Malta may be technically out of recession but this does not mean it is out of the woods.
"Officially, we are out of the recession but the Prime Minister should have been more cautious before announcing it," economist Karm Farrugia said.
Prime Minister Lawrence Gonzi last Thursday said Malta had made it out of the recession six months before the government's June forecast, with provisional statistics showing GDP grew by 0.5 per cent in the last three months of 2009, after contracting in the previous three quarters.
But on Sunday Labour MEP Edward Scicluna disputed Dr Gonzi's announcement. He said between the last quarter of 2008 and the last quarter of 2009, public and private consumer expenditure dropped by €6 million, investment went down by €21 million, receipts from exports of manufacture and tourism together fell by €42 million and compensation of employees fell by €14 million.
However, Mr Farrugia argued that Prof. Scicluna did not base his argument on the international definition of a recession, which says that two consecutive quarters of GDP contraction meant a country was in a recession, while one quarter of growth meant a country was out of it.
Although Mr Farrugia disagreed with this definition, he pointed out that Dr Gonzi was correct in saying Malta was out of the recession.
"Prof. Scicluna's mistake was comparing two quarters which were a year apart, which is wrong."
He agreed with the MEP, though, that it might have been too early to make the pronouncement as there could still be another contraction ahead. He said Dr Gonzi should have voiced caution and wait for another quarter. Economist Lawrence Zammit agreed Malta was out of the recession. "From the data, it looks as if we are out, because it shows an increase in GDP," he said, adding that was the way economists traditionally measured recessions.
"This does not mean the difficult period is over, that we no longer have challenges," he said.
On the other hand, business analyst John Cassar White said, while technically there was a slight move out of the recession, the debate should not be about semantics, about what constituted a recession.
"The point is whether the areas that need to grow - tourism, manufacturing and services - are in fact showing signs of recovery or not. Technically speaking, if GDP has grown, we are moving out of recession."
However, at this point Malta still needed time to see whether tourism and manufacturing would recover, said, adding he was encouraged by the resilience shown in the services sector, especially financial services.
Mr Cassar White believes it is still too early to say whether Malta is out of the recession.
"I would rather look at trends rather than statistics for one particular quarter. What would encourage me is if I see steady export-oriented growth for a couple of quarters until we can say we are out of the woods."
While a quarter of positive growth was obviously preferable than a decline, "before becoming very euphoric about it, we need to see what the trends are".