While the world is still grappling with the crippling recession which set in after the banking sector collapse, there have been small glimmers of hope.

Economies around the world have been recovering and market confidence is returning to different sectors. This does not mean there is all round growth.

Put very basically, the world’s economy is still on a downward trend. Imagine a U-shape. At present, the economies of the world seem to have hit the lower left hand curve of the ‘U’. This means that the curve is bottoming out and that we might be on the road to recovery, although growth is still negative, it seems that the light at the end of the tunnel is visible. The fact that the price of oil is steadily increasing is testament to the fact that investor confidence is also increasing.

And this is where we must learn from the mistakes of the past. One of the major factors which brought about the recession was credit. Put simply, business was being made on credit, and when credit turns into bad credit, the bubble bursts.

The difference between a U-shaped and W-shaped recession is all in the curves. If one were to look at the letters and apply simple economic understanding, the U-shaped recession is the standard model where there is a sharp dip, a bottoming out phase and a recovery phase.

The W-shape is different. You get a sharp dip, a small period of recovery followed by another dip and eventual long-term upward trend. Malta is particularly at risk of the recession turning into a W-shaped one. “Why?” one may ask.

The answer is simple. Our economy is mainly dependent on outside forces, and so, we follow the world trend. But of course, there are internal factors that will influence the local economic climate.

Malta’s economy has, like everyone else’s, faltered, but there are hints of a recovery. What we must bear in mind is that if we have for example, one per cent contraction, one is not going to wake up the next morning and find three per cent positive growth. That momentum of growth is built over months and years. But if things carry on as they are, we could be forecasting growth, that while still negative, is an improvement on the current state of affairs.

And this is where we must be cautious. The reason being; tourism results. We cannot rush headlong into an economic development and stimulation phase before we know the true extent of the impact which lower tourist arrivals will have on our economy.

It would be a grave mistake to assume that we are out of the woods before getting a true picture of what Q3, which has just started, brings to our doorstep. Supporting an ‘artificial’ economic recovery would simply lead to an immediate downturn once the effects of the slow summer begin to be felt. A much more prudent approach would be to monitor tourist arrivals throughout the course of Q3 and link those figures to economic performance. This would allow a much clearer, and more up to date real-time assessment of the state of affairs. In that manner, the government could check and hold to allow our economy to recover in a sustainable manner. The last thing any economy in the world needs right now is more shocks. Malta, like any other country, needs to plot a slow and steady recovery plan. Jarring up and down spikes will do no one any good, least of all the citizen; Joe Public.