The Hon. Tonio Fenech, Parliamentary Secretary in the Ministry of Finance, launched the “Economic Bulletin – March 2007”. The Hon. Tonio Fenech later gave details of the economic situation in Malta:

2006 – Economy on

the upturn

Main highlights:

• Foreign Direct Investment amounted to Lm575 million in 2006

• Imports increased by 9% and Exports increased by 14%

• Inflation decreasing to acceptable levels below Maastricht criteria

The Economic Bulletin provides an analysis of recent developments in the Maltese economy. This review takes into account data available up to 9 March 2007. A review of the international economy is dealt with in the second chapter while the main developments in aggregate demand and supply conditions are the focus of chapters 3 and 4. Chapter 5 analyses price developments and chapters 6 and 7 deal with fiscal and monetary developments respectively. The following are the main conclusions of this analysis:

During 2006, the Maltese economy continued to show signs of a recovery. Gross Domestic Product (GDP) registered an increase of 5.5 per cent in nominal terms and 2.9 per cent in real terms mainly underpinned by increases in private consumption expenditure. Furthermore, the contribution of the external sector to GDP growth was positive in contrast to the situation since 2003.

During the 12 months to October 2006, both the labour supply and the gainfully-occupied population, as compiled on the basis of the administration records of the Employment and Training Centre (ETC) increased by 0.3 per cent whereas the unemployment rate remained unchanged at 4.9 per cent from October 2005.

The main driver of job creation is the expansion in the services sector. Further expansions were observed in a number of emerging sectors like recreational, cultural and sporting services and the manufacture of chemicals and chemical products. One also notes the improvements in the value added of the manufacturing sector, further indicating that the ongoing restructuring to shift towards higher value added activities is succeeding.

While the cruise liner industry continued to expand during 2006, tourist departures declined by four per cent. Despite the drop in tourism departures, data for the first nine months of 2006 shows that gross foreign exchange earnings remained relatively stable at Lm210.3 million.

A stable local inflation rate was recorded during the first months in 2006, but subsequently a significant increase in inflation of around 0.6 percentage points was registered between April and September 2006. However, during the last quarter of 2006, the inflation rate followed a downward trend standing at 2.6 per cent in December 2006, being 0.3 percentage points below the estimated Maastricht price inflation criterion. Recent inflationary developments in Malta indicate that the oil-price shock was absorbed with limited if any, second-round effects.

The government’s priority to address the imbalance in public finances has led to a decline in the structural deficit from Lm93.4 million to Lm80 million in the first 11 months of 2006.

This was mainly the result of an increase in revenue which more than offset increases in expenditure outlays.