Now that the Commonwealth Heads of Government Meeting is almost over, perhaps the country and its government can get back to tackling the really important issues of the country.
Speaking at a business breakfast organised by our sister paper The Malta Business Weekly and the Le Meridien Phoenicia some days ago, economist Gordon Cordina argued that unless Malta shifts to a strong growth pattern, it will not only fail to catch up with the EU leading countries, but also slip irremediably backwards.
Mr Cordina argued that:
• Just to keep up with the demographic shift Malta needs a growth rate of one per cent per year.
• To keep employment stable through generation of jobs, Malta needs a further 2.4 per cent growth every year.
• Otherwise companies will continue to shed jobs and no replacements will be found.
• Malta’s stated rate of growth is 1.2 per cent, less than competitors such as Cyprus and less than the EU’s average growth rate of 1.7 per cent. If Malta wants to catch up with the EU average by 2015 it needs to generate some five to eight per cent growth a year. If it decides to reach the EU average within 20 years, it needs a growth rate of 3.5 per cent to four per cent.
Compare this now to the strangely under-reported and under-commented Central Bank Quarterly Review published earlier last week, which quickly got submerged under the plethora of Queen-mania and ministers grabbing photo-opportunities like there’s no tomorrow.
As reported elsewhere in this issue, the CBM reported that the economy is now estimated to have grown by 1.3 per cent in the first half of this year, and that last year it only grew by 0.4 per cent, not by one per cent. This is patently not enough not even to remain where we are demographically, let alone to keep employment stable or to climb up the EU ladder.
The CBM report has more bad news to give:
• In the first half of the year exports fell by nine per cent, mainly reflecting a drop in manufacturing activity, particularly in the all-important electronics sector, although the sector as a whole saw an improving value-added.
• For all the lip-service to competitiveness, growth in employment income accelerated to a 2.3 per cent increase, greater that is than the actual rate of growth of the country, although less than the rate of inflation – 2.9 per cent in June.
• In what is called the motor of the economy – tourism – while there was a slight increase in sheer numbers (far from the 50,000 more target set by the government itself) the number of bed nights declined by 1.7 per cent, as also the average length of stay.
• No wonder then that the Business Perceptions Survey, carried out in August, shows business confidence plummeting again, after the slight recovery in the previous quarter.
One must also remember that all this was registered before:
• The increases due to fuel oil price rises
• The closure of the Denim factory and the sacking of 800 plus employees
• The possible reactions by employers to the double whammy of increased oil charges (which will hit all employers except maybe some 40 big factories) and increased wages for employees (Lm2.50 per worker per week as from January)
• The possible impact on the European economy and especially on the Maltese one of the coming rate increase by the European Central Bank.
Speaking on 10 November at the Institute of Financial Services annual dinner, practically the only formal occasion when he speaks in an official manner, the Governor of the Central Bank too urged “a concerted push for faster growth”. “The longer it takes to expand the productive base of the economy, the more onerous the challenge will be,” said Michael Bonello while urging a coherent policy framework on three levels: the macroeconomic level with fiscal consolidation; the microeconomic level with productivity-enhancing measures despite the failure to adopt a social pact; and far more improvement in the efficiency of the public sector.
All the key economic thinkers thus are in agreement, and perhaps even the political parties, the trade unions, the employers. There is no alternative to growth, stronger growth than the anaemic one we have had for the past years.
What remains is to turn words to actions and to make them create a positive effect. This is easier said than done and no one but the government can do it. The fact we have had a no growth economy for the best part of 10 years is an indictment of the government/s we have had. To hear government ministers now blithely state ‘what we need is a culture-change’ as if they have just come to power is shocking. If the government is not there to push growth, what is it there for, to hold the Queen’s hand?