One did not have to wait for the Central Bank’s annual report to denote that the Maltese economy is under-performing.
It is the talk of the town among leading economists, political analysts and business people.
Although the word “recession” is being carefully avoided by government spokesmen, it is common knowledge that we are experiencing most of the symptoms of a recessionary period.
A few days ago we had sterling proof of government’s cheek.
When interviewed by his party’s newspaper, the sprightly Finance Parliamentary Secretary, who has so far failed to shirk from dismissing two of his peer predecessors as mere armchair critics, first called for a consensual approach to Malta’s entry into ERM II and then went on – in the same breadth – to lambast Alfred Sant for the current downturn in our reserves, attributing it to the “uncertainty” that he created when he recently spoke of an overvalued Maltese lira.
Anybody familiar with the spiel that financial institutions and stockbrokers have been dishing out in recent weeks will confirm that most of them have been strongly advising their clients to shift their savings and investments overseas.
With the European Savings Tax Directive implementation date looming on the horizon I have heard of various local entrepreneurs who have shifted their overseas savings into investments into foreign property buying, even in the far off Asian continent.
If there is any uncertainty on the island, it can only be attributed to the flip-flop policies and statements made by government itself.
I will not pronounce myself on the euro issue because I do not think it is ethical to do so at this stage, but with the country still reeling from its rock bottom listing in the benchmarks of the Lisbon strategy, one can easily tell why we also ranked and fared so badly when World Economic Forum benchmarks were issued a few months back.
Competitive Malta seems to be doing a good job in sensitising public opinion to the need to be as competitive as can be, but unfortunately government policies – including its recent increase in interest rates – have been taking us in a totally different direction.
I personally contend that most of government’s targets re the fiscal deficit, the national debt and the inflation rate are very far off target.
Some people might argue that the European Commission recently expressed its satisfaction at the fiscal consolidation process underway locally, but those familiar with the local financial scene know that these people tend to rely more on government data rather than using the probing approach adopted whenever IMF officials visit the island for their periodic reviews.
It is useless to blame external shocks because in the final analysis, most of our competitor countries are exposed to the same sources of such shocks.
So long as we do not introduce accrual accounting locally, all public finance figures will continue to be taken with a pinch of salt.
Most of the inflation we have is government-induced, something which makes us question even more government projections to reduce such inflation figures in the near term.
Government’s tax and spend policies are still running riot in our midst.
According to NSO figures, Malta is one of the forerunners of those EU member states to have the highest rate of taxes among their generated revenue – were one to exclude NI contributions.
It is useless aiming to achieve the five Maastricht criteria while stealthily eroding our standard of living.
The government seems to be indifferent to the fact that we have an economy which is far more open than the EU average, as well as having a far greater dependence on tourism than other European and Mediterranean destinations.
Even applicant countries like Bulgaria and Romania are doing better than us, as far as the Lisbon targets are concerned.
Malta simply has one of the lowest percentage levels of employment, particularly among female workers, low educational standards including illiteracy among youths, and a poor research and development record, while we continue to lag behind in the environmental and energy sectors.
With the leading industry on the island, ST Micros, trading mainly in dollars, we would like to know whether those studying the likely impact of the euro have taken this important aspect in consideration.
Whenever I used the word “stagflation” I used to be sneered at, particularly by Prof. Josef Bonnici, but this is exactly it – the state of affairs of our economy – ie an under-performing economy, with very little inward investment by way of FDI and larger than average inflation.
Regardless of our membership of the EU, at present Malta is simply not fit to meet the globalisation challenge.
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Leo Brincat is the Labour Party spokesman for Foreign Affairs and IT.