Statistics released by the EU’s statistical arm Eurostat yesterday confirmed the deep mire that the Maltese manufacturing sector finds itself in with a drop of 35 per cent in exports for the month of February.
The writing has been on the wall for some time and the figures released merely confirmed the feeling that has been permeating through the sector for some months. The first rumblings began when certain companies, massive employers in Malta, announced that they were operating within the region of 40 to 60 per cent of capacity.
The 35 per cent drop in exports registered in February follows a 23.3 per cent drop in January, and an overall 15 per cent drop for the whole of 2008 – the EU’s highest for last year (see page 9 for anaylsis). As ever, our country’s economy gets hit later than most, and unfortunately, due to our particular circumstances, it will take us longer to come out of it.
The results do not bode well for the country’s first quarter gross domestic product figures, especially taking into account the fact that at the end of last year’s fourth quarter the Maltese economy began to nosedive and had slipped into an official recession by the end of last year following two consecutive quarters of negative economic growth.
As the financial crisis began to spiral out of control, some companies announced that they were going down to four-day working weeks – the worries of both employee and employer must have been ringing in government ears.
In fact, a task force was specifically set up to identify companies that needed assistance, establish the form of assistance they needed and implement that plan to safeguard jobs. In some cases it worked, and in others it didn’t. What we must remember is that the export market is completely dependent on foreign demand. Put simply, if multinationals ain’t selling cars, then we ain’t going to be able to sell the components that go into them.
But if one were to look at the state of affairs from a slightly different angle, one might argue that Malta has fared better than others. What do we mean? In business terms, scaling back to a four day week has a totally different meaning than Joe Public would interpret it to be. Businesses still retain a degree of confidence in the Maltese market, plain and simply, because they have downsized to get over the hump. What this means is that they do not anticipate that the problems facing the economy (in a global sense) will last forever. The mere fact that they are staying here to “ride it out”, means they believe that the situation will eventually pick up and that they will recover. Whether or not they do, remains to be seen.
When one also looks at the fact that certain manufacturing giants are shutting down their North African operations and redistributing them to existing plants in Malta, one can see that while Malta is definitely not a safe bet (no where is), it’s as safe a bet as there is.
Throughout Europe, there has been the debate over protectionism and that the various aid packages being bandied about do not allow the free market cycle to continue. In others words, it is keeping companies that should have gone bust (in the natural pecking order) in business. When one looks at the realities of Malta, then this newspaper will be the first to say that safeguarding jobs must come first and foremost.
The key to it all is resilience. We have been lucky insofar of having had good performance in the past few years which cushioned the blow we are now feeling. It was also a good call to go for the euro when we did. If we still had the Lira – backed by reserves of sterling and dollar, the situation could be a lot more dire than it is, we could have seen the money in our own pockets become worthless.