Policymakers are often puzzled by conflicting signs coming from within the economy. Feedback from retailers suggests, for instance, that a number of them are under pressure. This is in part due to construction activities in Valletta and parts of Sliema and to increased competition from outlets at The Point in Sliema. Some complain that stocks are moving more slowly than usual, despite the recent sales period. Others are cautiously satisfied with their outturn, not taking the impact on demand of events in Libya into account.
Increasingly, the term “economic growth” is taking clearer widespread meaning than hitherto. Reports that real growth remains slower than required to start catching up with the average of the more prosperous members of the European Union translate into practical understanding. This is also true with regards to disposable income, rising inflation and the biting reality of the threat of job losses.
That notwithstanding, the official statistical data shows that the number of those holidaying abroad remains quite substantial, the net number of retailers and other businesses creeps up and the established restaurants do well enough to attract closer encounters of the taxing kind with various IRD inspectors. Anecdotal evidence in the form of various outlets experiencing improved turnover than expected is another input into the puzzle in the policymakers’ minds.
It would be perilous if the puzzle lingers on and even converts into a conviction that we are getting along quite well. The policymakers need to continue to give more attention to segmentation. Statistical averages mislead. At an extreme, a person earning €30,000 annually and another getting a bit over the minimum wage, say €8,000, yields an average income of €19,000. While the reality is not like that, since averages are worked out on the basis of weighting by the number of earners in each income group, policy cannot be set on that “average” basis.
Nor should one assume that policymakers are so short-sighted as to do so. When such averages are worked out, incomes are indeed weighted by the estimated number of people in the various income ranges. I am not aware that there are as yet many official data in that regard to indicate to analysts and to those who map out policy how income is distributed in Malta, although recent parliamentary questions gave some indication of that on the basis of income tax collected by income range.
When it comes to indicators like outward bound travel and seasonal spending the lack of segmented data is greater still. It is the policymakers who have to segment their appraisal. Such segmentation would give a somewhat better understanding of what is going in civil society.
A casual observation suggests that disparities are growing. The social statistics being produced – and, while progress at the National Statistics Office has been made in that regard too, its managers will probably admit that much more needs to be done – give weight to that impression.
The social point is not those who eat out and travel, but the others who not only cannot do so, but can hardly make ends meet. There are still others who face difficulties without end.
The social situation can only be improved in a sustainable manner through faster economic growth. The relevant statistic in that regard in Malta’s case is not consumption. A high proportion of what we consume comes from imports, even allowing for the fact that we are totally dependent on foreign supply to meet heavy energy requirements at arising cost and most of the raw material inputs into local production include the number of people in gainful occupation and the receipts from exports of goods and services.
Nor is it construction, which remains under pressure. To be truly meaningful given our circumstances Malta’s economic growth has to be fuelled by exports of goods and services, and by investment in activities that generate more of them.
Malta’s policymakers are right to emphasise that the economy is strongly influenced by what goes on in the rest of the world, particularly in competitor countries and in our main markets. The forecast of growth this year needs to be scaled down, not least because of the repercussions from the Libya events. That has also influenced he current outlook for energy prices, which could come under fearful pressure if unrest extends to Saudi Arabia.
Other threatening considerations include pressure from less costly products and more in vogue tourist destinations. That consideration has a knock-on effect on investment prospects. Growth depends on investment. The policymakers know that basic economic truth well enough. What counts is how that knowledge is put to work through continually updated efforts to attract export-oriented investment, especially in the current uncertain circumstances in our Mediterranean region.
Notwithstanding the turbulence in our neighbouring countries and beyond top priority still remains exports and investments. There is no segmenting that hard fact, and the further fact that improving them is being made increasingly more difficult by the day.