After meeting MCESD, Finance Minister Edward Scicluna began on Monday the lengthy process of pre-Budget consultations by holding a meeting at the Phoenicia Hotel.
There will be two more public meetings, one in Gozo, before Budget Day on 22 October.
Despite all the talk on Malta’s economic success, it is not easy to manage it, the minister said. It is more dangerous to get down from a mountain than it is to climb up.
We cannot take this success for granted. Malta’s economic progress is closely watched and interpreted all over the world.
Thus the NSO result of Q2 needs interpreting. Before that quarter, Malta’s growth was estimated at 7% with real growth being between 5% and 6%. In Q4 the economy was still going strong with a 5.9% growth when the normal growth was 8%. What seems to have happened is a deflector in the case of exports, something difficult to understand. It would seem this was caused by one company and its results, Scicluna said, not mentioning the company’s name.
He then outlined three sectors which have experienced strong growth. In the first place he put quarries that are facing huge demand because of tourism. Secondly the igaming and fintech sectors are growing fast. Then comes tourism, followed by the construction sector.
The other sectors reported more moderate growth but all sectors reported growth.
Nevertheless, Malta as an open economy faces challenges coming from abroad – Brexit, politics in Europe especially in Italy.
Growth cannot be taken for granted. It must be watched all the time. The Maltese economy at this point does not need extra stimulus.
The inflation rate is picking up to 1.6% or 1.8%. The ideal is an inflation rate of 2%, the signal of a healthy economy. In the UK, the Governor of the Bank of England has to write a letter to the Chancellor of the Exchequer to explain any time the rate of inflation goes significantly more, or under, 2%.
What has kept inflation from soaring has been the influx of foreign workers. Other- wise, we would have had a tight labour market.
One must be careful when speaking of foreign workers. One must analyse the overall impact.
The Maltese working force is now 200,000 and employment is at a constant rate. We used to think we would be lucky if we get a 70% participation rate but this has increased in recent years and we now can say we have a North European economy.
There is still a long way to go. We must take care of the poor and the elderly in retirement homes.
Ideally, we should have a balanced economy that is in a small surplus. We do not need a big surplus. Besides, we have the IIP proceeds which we can use to balance the economy. Our economy cannot be compared to that of the UK, but more to that of Germany or the Netherlands.
A balanced economy with a small surplus also helps carry the national debt.
As to public finances, the IMF delegation has been here and has offered some ideas in this regard. The external account also indicates a strong and healthy economy.
The minister spoke about people at risk of poverty. Government still has a lot to do to continue tackling this issue but one must ask the question: Are you better off than last year, even if in absolute terms the person is still under the poverty line.
He also agreed we must be more careful with regards to foreign workers.
Finally, the minister ran through what had been suggested by the constituted bodies. Most were suggestions that have been made over and over again.
The same themes were heard from representatives of the constituted bodies when the meeting was turned over to the floor. It was the same people as always saying the same things they have said at countless MCESD meeting.
One of the few exceptions was a priest, Fr Busuttil, who spoke of people suffering. Malta’s rate of school leavers is one of the highest in Europe. Some people cannot afford payments and they are doubly punished when they seek to pay their dues late. People cannot afford rents. He is glad Malta is moving ahead, but asked policy-makers to think of this reality.