Credit-rating agency Morningstar DBRS has confirmed an A rating; it believed risks to Malta's credit ratings remain balanced with the economy having strongly recovered from the pandemic.
It reported real GDP increase of 18% between 2019 and 2023, compared to an increase of just 3.3% for the euro area, driven by a rebound in tourism and strong growth in other important service industries such as professional services, information and communication (ICT), gambling and trade. Malta is proud to be classified as an advanced economy by the International Monetary Fund and considered a high-income country by the World Bank.
The Fitch rating agency attributed our high A+ grade mostly to the full recovery of the tourism sector, which closed last year with almost three million arrivals, exceeding 2019 figures by more than 8%. Readers are also arguing that such generosity is unwarranted, especially considering that our wages are below the EU average.
In addition, the Gini co-efficient index, which measures how equal a country's distribution of income is, shows that income inequality in Malta is increasing. Yet, no economy is perfect and certainly, we have advanced a lot since Independence and gradually shed our fortress mentality as an ex-British colony.
Talking about tourism, we cannot ignore the multiplier effect this has had on our economy. Around the world, airlines, hotels and travel businesses are pleased to witness the return of tens of millions of tourists and their hundreds of billions of euros, though experts suggested the revival could take months to fully gather pace. Many are basing their hope on the revival in the Asian market.
The lifting of quarantine rules effectively opens the door for many Chinese to go abroad for the first time since borders were slammed shut three years ago. Can Malta stand to gain? It is blessed as one of the sunniest European destinations with a good climate all year round, making it an ideal location for a short getaway.
Obviously, many have written to the tourism ministry to ensure a better upkeep and cleanliness level of touristic zones. Fingers crossed; numbers are expected to exceed three million visitors this year. It is pertinent to reflect how no official studies have ever surfaced over the years to discover the actual value added (GVA) that the sector contributes to the economy after deducting infrastructural costs, environmental and ecological damage, food and beverage costs and state subsidies to low-cost airlines.
It is hoped that Minister Bartolo will initiate a similar study, as he has previously done on related subjects, such as the substantial funding provided to international film crews, aimed at revitalising the film industry. Looking back to the origin of tourism, in the early 1960s, this new industry was warmly welcomed and supported by politicians as a pivotal means on how to balance annual budgets and create lucrative jobs for hundreds with Air Malta.
Now that two years of pandemic shutdowns have concluded, the finance minister aims to recover lost revenue. According to David Curmi, previously an executive chairman of Air Malta, (now appointed director of KM Airlines) the plan was to dissolve Air Malta and replace it by a new Maltese carrier (KM Airlines). This is now a reality and the IATA granted us our wings appellation. No official reason was given by management to explain why the Air Malta service suffered so much degradation and financial woes. All this compounded the issue that one cannot rely on Air Malta with its under-capitalised structure, chronic losses and having just eight leased aircraft at its disposal.
Its bloated crew and pilots' overheads were a reflection of political interference from those pulling the strings from Castille. It is no secret that some 80 ex-pilots currently enjoy a lucrative early retirement scheme, which will see them receive two-thirds of their salary over 10 years.
The finance minister said he plans to "stop this madness" and that he planned to offer pilots a one-time payment to terminate this controversial clause from their collective agreement. Certainly, the government will be forking out substantially more to buy out this clause. Sources reveal a similar package is to be offered to cabin crew, which sources said is expected to cost around €200,000 each. This will be offered to around 100 members of cabin crew.
Those who take the offer will be bound to forfeit working within the public sector for six years. Air Malta will fork out thousands in payments to pilots who retire in line with a collective agreement clause that the government may "buy out". The collective agreement clause states that individuals aged 55 or over, who have been pilots with the national airline for more than 25 years, would be paid two-thirds of their salary each month until they retire.
One recalls Air Malta's decision to terminate the employment of 69 pilots in 2020 following the breakdown of negotiations with the Airline Pilots Association. On the bright side, prospects for tourism this year look good and provided Europe avoids the pangs of a mild recession, there is a feeling of so-called revenge tourism with millions of travellers still having unspent cash in the drawer, saved during two long years of restrictions.
Nostalgically, four years ago, ex-prime minister Joseph Muscat was bullish about the tourism sector, projecting that soon we should start attracting rich tourists who spend up to €5,000 a night lodging in super luxury hotels. Was he anticipating an influx of millionaire Asian visitors projected to visit Europe this year?
Notice the starting gun is fired by the court decision not to revoke planning permission for the ITS mega site. This will join more tower cranes, hired to build pristine hotel towers such as the massive Villa Rosa complex, P. X. luxury tower, Mercury towers, Manoel Island, Gap hotel, Comino bungalows, rebuilding in larger footprint of the Mellieha bay complex and possibly more luxury towers by Corinthia.
Such superlative investment is fertile seed sown to attract quality visitors. For this and other reasons, the handpicked directors navigating KM Airlines need all our trust and encouragement to nurture the newly-christened airline and surreptitiously upgrade our tourism sector.
George Mangion is a senior partner of PKF, an audit and consultancy firm