Provisional data compiled by the NSO indicate that the Maltese economy contracted by 1.3 per cent in real terms in the last quarter of 2003, following a3.9 per cent decrease in the first quarter, a 1.6 decrease in the second and a 0.3 per cent one in the third quarter.
Meanwhile, the business perceptions survey carried out by the Central Bank in January and February indicates a further decline in business confidence since the previous survey.
The survey reports increased pessimism regarding the short-term prospects for the Maltese economy amongst export-oriented manufacturers despite there having been a certain pick-up of activity in these same exporting firms with turnover improving in the last quarter of 2003. This improvement was expected to continue over the following three months, thus suggesting, the Quarterly Review adds, that the exporters’ increased pessimism was more related to domestic demand conditions than to uncertainty about the international environment.
The Survey lists the main reasons contributing to the economy’s contraction:
Private consumption rose as people tried to beat the 3 per cent increase in VAT;
Imports of consumer goods rose at a faster pace than income, while sales of domestically-produced manufactured goods also grew;
Exports and re-exports of gods and tourism services declined substantially;
There was a significant rise in government current expenditure, following a sharp deceleration in the middle of the year;
And a further rise in registered job-seekers with an unemployment rate up to 5.7 per cent;
The downward trend in the rate of inflation bottomed out and started to rise again;
The number of tourist arrivals fell by 7.2 per cent during the last quarter of the year, a decrease of 16,000 passengers.
The Business Perceptions Survey said that locally-oriented firms were uncertain about the prospects for the first quarter of this year, and real estate and professional services expected turnover to contract significantly. The majority of firms believed that inflation and unemployment would rise in the first half of the year. But most respondents said they intended to increase their investment on machinery and equipment over the coming 12 months.
There was also more concern than previously about possible industrial action (especially in firms in the food and beverages and the machinery and equipment sub-=sectors) and the cost of finance (mainly in the tourism and construction industries).