The world economy appears to be coming out of the recession. This was announced by the person who has been reappointed chairman of the Federal Reserve, the US Central Bank, Ben Bernanke. The Organisation for Economic Cooperation and Development has stated that it shall be revising its estimates for economic growth, upwards.
Mr Bernanke has also said that initially economic recovery shall be slow. In fact, the US economy is likely to experience negative growth also this year, but will have positive growth next year.
He reaffirmed that although the worst has been avoided, the US economy shall still be facing stiff challenges in order to ensure that the economic recovery shall not be short lived. Moreover, he insisted that there needs to be a new regulatory framework to ensure that there is no repetition of the mistakes and excesses committed in the past two years. However, the head of the European Central Bank does not seem to share fully the optimism of Mr Bernanke. European Central Bank Governor Jean-Claude Trichet was reported saying that although there are some signs of recovery, it is still too early to say that the situation is getting back to normal.
These divergent views are perhaps indicative of the current international economic recession. Ever since it became obvious that the world's leading economies had moved into a recession last year, there wasn't a consensus as to what had really caused it, how long the recession would last or what were the best cures for it.
The leading economic theories that have characterised the management of the world's leading economies have been proved to be incorrect. Therefore, it is hardly likely that there would be consensus as to how we will emerge from the recession, as to what is the likely economic behaviour of firms and consumers after the recession, or when would we be able to state that the situation is back to normal.
What seemed so simple just 24 months ago appears to be so difficult today. An article on The New York Times of some three weeks ago claimed that the GDP has outlived its usefulness as an indicator of how an economy is doing.
It said that it is becoming a miserable failure at representing economic reality. One may agree or disagree with claims such as these. On the other hand, just as we all thought that we had never faced a recession such as the current one, it is highly probable that when the economic upturn comes, it will be equally a novel situation that we would never have experienced. Thus, the old economic concepts may no longer apply and we may need to develop new economic theories to have sustainable economic policies.
These issues are not only global economic issues, but are also issues that are close to home and impact our small economy as well.
We need to ask ourselves the question as to what shape the Maltese economy will have when the world's leading economies start moving forward again. How will Maltese consumers behave? How will Maltese investors behave? How attractive will Malta remain to foreign investors? What role will tourism and manufacturing play in our economy? And if they will continue to have a significant role, what sort of manufacturing activities shall we have and what sort of tourism shall we be having? What should be government's role in our economy? Will employment remain the central feature of our economic strategy? Can there be economic well-being and the generation of new jobs without necessarily increasing the value of our economic activity?
Our economy has a very good track record at exploiting the opportunities that the international situation has presented us with in the past years. This has enabled us to modernise our economy, to develop new activities and to generate a significant number of new jobs. Very often we have taken all this for granted and have at times assumed that the economic situation would remain rosy, irrespective of the policies that we adopt. Surely we cannot adopt this attitude in the future.
As the world moves out of the economic recession, we will need to make sure that our country continues to have a relevant role to play in the new scenario. This is why it is so imperative that we ask ourselves the question, "What will it be like?", and that we seek to provide answers to this question.