Growth pains
Last week I attended an excellent economic analysis presentation at the Malta Chamber.
One of its main conclusions was that for the past 20 years, following Malta’s EU entry, Malta’s economy has changed, diversified itself and grew rather strongly. We have now reached a point whereby we need to clearly identify the direction in which we aim to steer our economy towards sustainable growth. Sustainability is key.
This is more so, as we are all living through and facing the symptoms of our economic growth pains. In recent weeks we heard the Minister of Health saying that Malta needs a second hospital to keep up with its growing population. As I am writing this article, I am reading another article stating that Enemalta is worried that the various energy outages that we had last summer are likely to repeat themselves come summer 2024, advocating the need for a new temporary energy plant. Obviously, the increase in resident population but also the increase in tourists all impact the stress upon our national health service and energy consumption. With regards to energy consumption, this is also impacted by the government’s policy of having a blanket subsidy on energy prices.
The symptoms of these growth pains are visible in our everyday life. Even the statistics clearly indicate it. I will just use two of these statistics. Below please see a comparison between the HICP for the euro area and Malta with regards the price for renting property in Malta, between January 2021 and December 2023. It is easy to see the massive divergence experienced in Malta, as the price of renting property is increasing at a much faster rate in Malta than across the euro area.
A second statistic is with regards inbound tourism. We now have the statistics for the full year, January to December 2023. Here we can see that while the amount of inbound tourists just exceed the three million mark and increased by 8.3% over the amount of inbound tourists we had in 2019, the real expenditure (when adjusted for inflation) per tourist, decreased by 2.3% when compared to 2019. This was so, because while the amount of inbound tourists, when compared to 2019, increased by 8.3%, the increase in real expenditure by tourists, when compared to 2019, increased by 5.7%. This is yet again an example of whether we ought to keep looking at how to grow our inbound tourism by just looking at the amount of incoming tourists. I believe the target should be how can we achieve, in 2024, an increase over the €2.347bn real expenditure we had from incoming tourists in 2023, while possibly not increasing the amount of inbound tourists we had in 2023.
I believe the way forward is clear. As we have been told by various international organisations, and any economist worth his salt, our next challenge is to achieve sustainable growth. In essence to do more with less, by increasing our productivity levels and by creating more value added in our economy.