The news came as no surprise. We all knew the economic difficulties that had hit elsewhere would have reached our shores sooner or later. The recession that has gripped countries all over the world is now official in Malta too.
The National Office of Statistics statement on the economic situation last Wednesday did not make things clear, and one had to read between the lines to see that Malta had registered two successive periods of negative growth, fulfilling the generally accepted definition of a recession.
In a nutshell, while Malta registered real economic growth of 1.6 per cent for the whole of last year, there was a 0.3 per cent negative growth in the third quarter followed by a one per cent negative growth between October and December.
The Malta Independent was the only newspaper that picked up on the issue, publishing the story on the front page last Thursday. The Nationalist Party newspaper In-Nazzjon, not surprisingly, ignored the issue. L-orizzont must have missed the implications of a news item that puts the government in bad light, while The Times probably relied too much on the NSO statement without looking into the fine print of the statistics, only to follow up the TMID story on its inside pages yesterday.
What started in the United States in September has had ripple effects across the globe and today, six months later, governments are still battling the consequences with no end in sight. The economic crisis has hit deeply, and it will take many months for the world to recover.
Like other countries, Malta is facing the consequences of the financial difficulties. This is happening in all sectors that are related directly or indirectly to the economy.
For one thing, there has been a dramatic decline in the country’s exports during 2008, at a time when the effects of the crisis were not being felt in full. Malta’s exports declined by 14 per cent last year when the European Union average was a 6.2 per cent increase. Only four EU countries registered a negative growth in this particular field last year, and Malta was one of them.
Secondly, the effects of the crisis are also hitting one of the major columns of our economy, the tourism industry. In 2008, we had a record year in terms of arrivals, but the numbers started to dwindle as from November and have spilled on into January too.
We have been assured by tourism authorities that the industry will pick up as from next month, and let us all hope this will happen.
Thirdly, several private companies are facing serious difficulties and have shed or are planning to shed hundreds of workers, while others have resorted to four-day working weeks. The fact that Malta’s biggest export company, ST, will be reducing the workforce by some 450 workers is already enough of an explanation of the seriousness of the situation.
Added to this, the government has had to intervene with other companies that expressed their concern about the challenges they were facing. Companies such as Trelleborg and Methode have received support to keep going, while many others have resorted to reducing the number of employees and/or other cost-cutting measures.
Another worrying symptom is the contraction of the pharmaceutical industry’s exportation.
As the Labour spokesman for the economy and self-employed Gavin Gulia said in a statement on Thursday, the situation is not rosy. The government, on the other hand, is trying to defuse the problem as much as possible, at least in public, with statements that are aimed to increase confidence. This is to be expected, as a government that shows panic would throw the whole nation into a frenzy.
Malta, due to its small size, can do little on a global perspective. But a much greater effort is needed locally to try to limit the damage.