Last week's contribution dealt with glimmers of hope that are emerging in the international economy. These glimmers of hope seem to have been reinforced during this week as industrialists and politicians in most of the world's leading economies seem to agree the worst seems to be over.

This has prompted people to ask whether the economic situation has stabilised (in other words, has the downturn reached the bottom or do we still need to dig deeper?), when we will start again to experience economic growth, whether job losses are over, when will we start to experience once more increases in personal incomes.

The news in Malta is still about the depth of the recession rather than when it will end or whether it is over. This is due to two reasons. First, there is a time lag in terms of the impact on our economy, as has always been the case. We are certainly not experiencing the type of economic downturn that has been experienced by other economies, even those that have an economic structure similar to ours.

The resilience of our economy is known and thus the impact will always be fairly mitigated. This means, however, that one can never be certain as to the extent to which the negative impact can be mitigated.

The second reason as to why we are still talking about the depth of the recession in Malta is that the Central Bank of Malta has revised downwards its estimates for growth in the gross domestic product. Thus, it is as if our economy moves against the current. This leads to a couple of very pertinent questions.

Will the international recession hit us as badly as it did to other economies? If it does, how long will it be before our economy picks up again?

These questions and others give rise to the title of this week's contribution. I could have worded the title in another way such as "the risk of making predictions". In fact the experience that we have been through in the last 18 months have, in fact, made it very evident that anyone who wishes to make predictions is doing it at his or her own risk. Eighteen months ago international economic analysts were very fearful of an international economic recession because the price of fuel was rising and there was no idea as to when it would stop rising. The same was happening to the prices of commodities.

In consequence, analysts were expecting a bout of cost push inflation that would then cause a drop in aggregate demand, and a recession would set in. The question then was when prices were expected to stop rising. Our government had responded to that by entering into a number of price stability agreements with importers. At a moment in time the financial markets could no longer take the pressure that was being caused to them by speculators and one bank after another found itself in difficulties and needed to be bailed out.

The question then was whether the whole truth on the banks had come out or whether banks were still hiding some of their losses.

The credit crunch started, prices started to tumble, business and consumer confidence evaporated and the recession set in. Thus, all predictions about a recession being caused by cost push inflation proved themselves to be incorrect as we ended up with an international recession that has been caused by a crisis in the financial markets that eroded totally business and consumer confidence.

So, have all predictions about the price of oil and commodities proved themselves to be wrong? All predictions about the depth of the recession were also wrong as it was felt that the international recession would not be as deep as it has turned out to be.

So at this point, one can either take on the role of the mythical character of Cassandra or one be the eternal optimist and hope for the best. Probably either extreme is incorrect as the international economy will find its way out of the recession, but just as one could not predict the nature of the downturn, one cannot predict the nature of the upturn.

It is this element of risk in the making of predictions that makes one wary in stating unequivocally as to the extent of the impact of the international recession on our economy or how to get out of the recession once it hits us. I strongly believe that government's solution so far has been the correct one. It has tended to adopt a micro approach with the objective of not losing any significant investment. However, it has not provided across-the-board bail-outs. The government's strategy is ensuring that Malta is well placed to benefit from a pick up in the international economy as it is seeking to maintain intact our economic structure.

In this regard making predictions becomes a question of fun and not a question of risk.