The Quarterly Review 2015 issued by the Central Bank of Malta confirms that GDP growth in Malta is being fuelled largely by increased government expenditure, primarily as a result of the increase in compensation to employees, the Nationalist Party said in a statement today. 

The Review states that “Government consumption rose by 8.3% on a year earlier, reflecting additional spending on both intermediate consumption and compensation to employees, notably in the public administration, health and education sectors. It contributed a further 1.6 percentage points to growth”, the statement, signed by deputy leader Mario de Marco, said.

Sustainable economic growth should be driven by the private sector. The Opposition is pleased to note that tourism and financial services, in quarter 4 of 2015 contributed positively to economic growth. However other sectors – including manufacturing and construction – are contracting or stagnant and consequently did not contribute to economic growth. Industrial production registered drops in the four quarters of 2014. The drop in industrial production is reflected in a drop in exports. As a result, the quarterly review reports that in quarter 4 of 2014, exports contributed negatively to GDP growth.

While certain elements of the private sector are contracting, the public sector's role in the economy is growing. Public administration education, health and related activities contributed 1.2 percentage points to nominal GDP growth in quarter 4 of 2014. Comparative figures for 2008 show a 0.6 contribution. Government's contribution is at par with what it was at the height of the economic and financial crisis in 2009. In 2009, government had to intervene to stimulate private sector growth due to the international economic crisis which led to a sharp drop in private sector economic activities. The international economic situation today is far more favourable and therefore there is no economic justification for increased government role in the economy.

The additional monies being spent by government are not resulting in improved services and are not helping our country's competitiveness. The public sector wage bill has been inflated by €127 million over 24 months, largely due to the increases in the public sector work force. These include hundreds of people employed in positions of trust and others who were recruited simply because of their links to people close to government. Public expenditure also increased due to increased public transport subsidies which trebled without delivering an improved public transport and due to handouts paid in dubious deals.

Government's economic policy to date was based on driving growth through increased public expenditure. This policy is not sustainable and there are already signs that the rate of growth is starting to decrease. Government should focus its energies on stimulating private sector growth not least by helping those sectors, including manufacturing that are currently underperforming.