The Maltese economy is at long last showing signs of recovery, and the country is seeing a light at the end of a long and winding tunnel that has been the global economic meltdown and financial crisis.
Following three consecutive quarters of negative economic growth, last year’s fourth quarter saw the economy leap out of recession and into positive territory once again.
But any backslapping and uncorking of champagne bottles may still be somewhat premature. Malta is not by any means out of the woods and there is undoubtedly still a long road to recovery lying ahead.
In tandem with Thursday’s gross domestic product figures, still more positive signs emerged yesterday, which showed the country’s industrial production levels to have impressively rebounded in January – heads and shoulders above the performance of its European Union counterparts.
Following four consecutive months of double digit drops in industrial production, Malta’s manufacturing sector began a somewhat muted rebound in December, when production rose by 4.3 per cent, after which, according to year-on-year figures, it soared by 14.3 per cent.
To put this in perspective, the EU27 average for the month of January was of 1.4 per cent and the eurozone average was slightly better at 1.5 per cent. The only EU country coming even close to Malta’s industrial accomplishment was Poland, which saw its industrial sector becoming 11 per cent more productive over the month of January.
Malta has so far ridden out what has been a brutal financial storm that has left practically no western economy unscathed. Within the context of the recession that swept across the globe over the last two years, Malta’s saving grace in so many ways was the country’s European Union membership and its adoption of the euro. One needs only refer to the quandary Iceland has found itself in, and its now desperate bid to join both blocs as soon as possible, to verify that.
But even with its EU and eurozone membership, Malta – with its small and open economy and consequential susceptibility to economic shocks – stood a lot to lose.
Such woes were, for the large part, avoided largely due to the conservative philosophy of much of the country’s banking sector, which saw it being the most liquid in the European Union and as such still able to lend and keep the economy’s wheels turning, albeit at a somewhat slower pace but turning all the same.
The government’s job saving manoeuvres, through the lateral-thinking task force set up to assist ailing factories, also saved hundreds of jobs that would have otherwise been placed on the chopping block.
But against the local backdrop, the eurozone itself is facing an enormous test in the form of Greece’s economic woes, leading to an ensuing loss of faith in the euro. EU leaders are now scrambling to restore that faith that has bolstered the euro for so long now.
There are some striking parallels between the Greek and Maltese situations, ones the government would do well to heed lest its diligence during the financial crisis is undermined at the end of the day by long-standing problems.
Corruption and tax evasion are crippling the Greek economy, millions work under the table, the private sector does not generate enough jobs or tax revenues, and one in four Greeks work for the state.
It is a system designed to produce deficits, and it is also a system that should also sound at least a little familiar to the Maltese.
Malta has the added concern of health care, where it is facing huge and potentially crippling expenditure as the country’s population continues to age over the coming years.
Much of Malta’s future economic success and stability will depend on how this and future governments address the above, if it is to stay on track this year and in the coming decades.
Again, there are positive signs but celebrations or sighs of relief could lead the country to complacency, which it certainly cannot afford. As economist Gordon Cordina recently said, given the fragility of the global economy, it is still too early to forecast what will happen this year.