Wishing brighter prospects for this year
There is a general consensus that Maltese households and businesses are faring relatively well in 2024, when compared to a two-year deprivation endured during the pandemic
All the while, there is a healthy prognosis that Malta is expected to exceed EU economic targets with GDP growth to reach 3.4% at constant prices in 2024. Naturally, no commentary into the present market conditions can avoid discussing energy prices. Malta's energy prices have stayed stable since the crisis began, shielding local businesses and households from the bloc's inflationary pressures.
A smart move was the finance minister’s policy to spend €350m in cash advances of one million daily to Enemalta and Enemed to maintain constant prices of energy. Since the past decade of the administration there has been volatile changes in oil and LNG prices but curiously enough, Enemalta announced no further reduction in tariffs since a 25% cut in 2014. More aspects of stability are coming from the International Monetary Fund (IMF).
Recent reports from the IMF and rating agencies confirm that the minister of finance’s economic projections for 2023 are realistic and achievable. Still, they also identify some uncomfortable realities that need to be addressed as they pose a risk to long-term economic sustainability.
The country’s economic performance was among the best in the EU, thanks to generous subsidies to tone down imported inflation and by increasing reliance on leveraging public and private consumption. The fly in the ointment is that the blanket subsidy for energy and grain imports does not encourage anyone in cutting waste; on the contrary it increases levels of inequality since the rich benefit at the same rate as the low-income cohorts.
The IMF’s advice for the government was to start being more discretionary in its support for families and households. The rich, owning luxury yachts, heated pools in landscaped villas and driving 600 horsepower SUVs stand to gain more from burning cheap energy. The present energy policy encourages waste and creates an illusion that Malta is a special case. A week in Amsterdam quickly showed me fuel prices there are double. Within three years, all cars entering the city core must be electric.
Back to Malta, our hedonistic approach of enjoying subsidies now and recklessly ignoring our growing national debt persists. Facts speak for themselves. With under a mere 8,000 persons or 2.9% unemployed, this is forcing entrepreneurs to seek scarce manpower by recruiting thousands of low-skilled labour from outside the EU. Even government institutions are making use of temping agencies to recruit hundreds of workers paid at an advantageous rate.
As always, there are a number of skeletons in the cupboard. To mention some, one cannot ignore the waste in human resources passing through our dysfunctional education system. The Central Bank of Malta indicated “while Malta managed to reduce rates of early schoolleavers to 16.7% in 2020; yet it silently acknowledges how the average EU benchmark is 10%”.
Thousands of secondary school students are terminating studies without achieving basic Stem qualifications. For the sake of producing a competitive labour force this is essential to attract foreign direct investment, as such deficiencies compromise employability later in life due to lacking digital skills. Realistically, this carries deep economic and social costs.
Many writers have commented in the past about an existing archaic education system. In an age of digital and AI priorities, Malta’s early school-leavers are facing an insurmountable wall. Another fly in the ointment is our low percentage of GDP spent on research and development. This cries out for improvement.
Many adopt an ostrich-like stance, burying their heads in the sand and questioning how we can afford a €250m increase in R&D funding with a €10bn debt. This is false economy. Educational prospects for 2024 and beyond dim in perspective as our entrepreneurial mindset is clouded in ways how to help create a solid ecosystem for start-ups (no vision for Unicorns within a jaded ecosystem).
A budget proposal to create a mere €10m venture capital fund is delusional. Compare this to the prevailing bad metrics on job opportunities prevailing in the UK. The British conservative government has confirmed the economy is in a mild recession and expects to carry on stoically battling a fallout from rocketing energy and fuel bills.
Back home, a brighter side of my prognosis for 2024 is the healthy rebound of tourism from central Europe, particularly Italy. Lufthansa significantly raised its profit outlook for 2023/4, citing continued "strong demand for air travel" as the industry leaves pandemic slowdown behind.
Remembering Sir Isaac Newton’s (he discovered calculus) famous words when in 1675, in a letter to fellow scientist Robert Hooke, he stated gingerly that if he sees further than others, it is by standing upon the shoulders of giants. Can tiny Malta stand tall?
“Facts speak for themselves. With under a mere 8,000 persons or 2.9% unemployed, this is forcing entrepreneurs to seek scarce manpower by recruiting thousands of low-skilled labour from outside the EU.”