The PN said that if elected it would stamp out corruption and promise to give investors peace of mind about good governance, build a train service linking Gozo to the University and lower income tax for all small businesses to 10 per cent on their first €50,000 of profit. It promises to halt environmental degradation, solve traffic problems and help society's least privileged.
The PL says that its best legacy to voters is a healthy economy achieved after a mere four years of administration. It quotes the EU's recent forecast which announced that the economy performed better than expected in 2016. Private consumption expenditure drove growth, fuelled by gains in disposable income. Who could have foretold in 2013 that instead of burgeoning inflation and galloping national debt we are expecting a budget surplus to reach 0.8 per cent of GDP next year? National debt, which fell below the 60 per cent Maastricht threshold in 2016, is forecast to decline to 52.5 per cent in 2018. No extra taxes were introduced; in fact, personal taxes on manager's salaries was reduced from 35 per cent to 25 per cent.
How did this bountiful harvest come about? The answer is a strong economic performance closely followed by rising labour market participation and employment, in particular among women, with jobs growth averaging 2.9 per cent in 2017-2018, while the unemployment rate stabilised at just below five per cent. It is interesting to note that net exports are projected to continue to contribute to growth, in particular due to the expansion of services exports, while goods exports are expected to remain subdued. The PN had heavily criticized the citizenship programme yet this has now reached a level of maturity and is cushioning government expenditure in meeting higher wages and welfare payments. As a result, the current account surplus is projected to continue to rise gradually over the coming years.
In line with the supportive macroeconomic conditions, wage growth is forecast to strengthen slightly, while rising productivity keeps unit labour costs increases contained. Such a growth in 2017 will be spurred by a recovery in private consumption, which, as can be expected will slow down ahead of the snap election. Domestic sales and retail business reported brisk results this year which augur well together with a higher return expected from record-breaking tourist arrivals. Kudos from rating agency Standard & Poor's which has raised Malta's long-term rating to 'A-', predicting that the economy will continue to grow by an average of three per cent a year until 2019.
We remember that prior to the 2013 general election there was a notable fiscal slippage which continued in the first quarter of 2013. One can expect a repeat of this fiscal slippage this year although due to a brief electoral period this may be better controlled. In the 2008 election, the annual deficit was estimated at €265.4 million, more than double the deficit of €118.9 million registered in 2017. In 2008, this was meant to be kept under wraps and not exceed three per cent but due to fiscal slippages, this exploded to reach 4.7 per cent of GDP. This caused the consolidated debt to reach 63.8 per cent of GDP in 2008.
In the here and now, we are thankful of the healthy signs shown by the economy. This points to a good prognosis showing future improvement in the economy matching the IMF's positive appraisals published in recent days as well as by other external observer entities such as credit rating agencies Standard & Poor's, Fitch, Bloomberg, and the European Commission. The IMF report states that despite the turbulence in the euro area, the performance of Maltese banks was satisfactory, and that they are adequately capitalised, liquid, profitable and well-positioned to transition into the Basel III regime. According to the IMF, the Malta Development Bank could help support the economy by giving SMEs access to credit, provided that such credit went to "viable firms". Equally important is continued structural reform momentum possibly to do more to foster research and innovation and improve the efficiency of its judiciary.
Compare our success to another EU country which has also progressed - ie Poland - a fast track achiever which bucked the trend of contracting economies. By sheer contrast to other ex-Communist countries, Poland is faring well and aims to achieve a lower deficit to GDP ratio of 1.5 per cent and its debt/GDP should be around 40 per cent, rather than the previous level of 54 per cent (compared to 60 per cent in Malta). By comparison, Poland stands out as being in pretty good shape, with very limited fat, if any (it never entered recession), and appears to be insulated from any euro area slowdown. This has come about because Poland has been vigilant in controlling expenditure and avoided profligacy in unproductive ventures aimed to hoodwink its voters into a false sense of the feel-good factor. Poland introduced serious reforms to its pension regime and boasts a funded first and second pillar scheme (both mandatory). Therefore, new entrants into its pension system contribute to a first pillar in a state-controlled fund together with a second pillar which is made up of private pension funds. It also did this economy revival by implementing an emergency budget, slashing costs and any surplus personnel in the public service.
In general, the eurozone countries witness a fragile economic recovery, which according to the ILO global unemployment is now at its highest level ever, at more than 210 million, and nations will need to create 470 million new jobs in the next 10 years to absorb new entrants into the labour markets. This is no mean feat. Youth unemployment has reached unacceptable levels creating perceptions of social injustice. Tensions and social unrest are increasing in the form of riotous public protests in Greece, Spain and France protesting against persistent unemployment levels, raising the retirement age and scarcity of jobs. European governments ought to strengthen the deficit levels of the euro region as the currency has suffered a considerable drop against the dollar. More is expected to be done to round up laggards who continue to run high deficits and indulge in burgeoning national debts. EU finance ministers toyed with ideas to impose sanctions on Maastricht rule-breakers.
At the same time the patient can only address the plague of fiscal deficits and uncontrolled sovereign debt by taking painful measures ie - cutting waste, introduce more taxes and regenerating sustainable solutions. But not all is doom and gloom. Grass shoots are appearing and the euro-area economy, which expanded 1.1 per cent in the first quarter, the fastest pace in recent years reported a healthy jump in exports while investment rose, ending years of contraction.
To conclude, the snap election set to take place on 3rd June has kindled the fury of all political parties which are in full electoral mode promising voters a pot of gold at the end of the rainbow. This snap election has unleashed the wrath of opposing political parties and has spurred a mad race to persuade the electorate that there is only one way to vote. Whatever the outcome on 4th June, the sun will still shine over these beautiful islands and one hopes that normality will prevail after the battle of the titans will declare the victor and others who graciously accept defeat.
Mr Mangion can be contacted at [email protected] or on +356 2149 3041.