“As far as statistics go profits in manufacturing, construction, wholesale and retail, hotels and restaurants, transport, storage and communication, real estate, renting and business activities all saw a decline in profits in 2009 and generally in wages too”

There can be no doubt that the internal market is as good as dead at this very moment. As a lawyer I can gauge internal consumption by the mood of most of my business clients and their colleagues, mostly retailers and wholesalers, who are extremely worried that consumers have simply stopped buying.

True that business is always at its weakest immediately after the turn of the year as usually consumers give it a break after the traditional shopping bonanza during Christmas. But this time surveys have confirmed that business was already bad during the festivities and the indications are that it has now literally come to a standstill. This situation has coincided with the hike in the utilities tariffs.

The optimists will argue that businessmen will always complain and that statistics show that there has been a little growth. While economists carry on agreeing not to agree on whether we have come out of the recession after all, and while it seems that it is more appropriate to wait for future results about the state of our economy before jumping to conclusions, it cannot be denied that the situation in the internal market is far from encouraging and that, beyond statistics, logic dictates that with less money in their pockets consumers are likely to spend less. Hence businesses are more likely to sell less.

There is a lot of talk about families in the lower brackets falling below the poverty line and the affluent middle classes having to change lifestyles to meet bills. However, what many have yet to come to terms with is whether small businesses will be able to absorb the increase in the utilities rates or simple have to close shop. It will be interesting to see what the situation will be by the end of this year.

And as far as statistics go profits in manufacturing, construction, wholesale and retail, hotels and restaurants, transport, storage and communication, real estate, renting and business activities all saw a decline in profits in 2009 and generally in wages too. I have also observed that suddenly exports have been revised upwards, partly due to playing around with the deflator, which is now reporting a sharper drop in prices, thus boosting volumes and impacting positively on GDP.

But I still cannot believe how consumption by households is growing with imports of consumer goods falling in nominal terms and VAT revenues were falling in the first 11 months of 2009. Some statistics simply defy logic. It will take an economist a large dose of chutzpah to say that consumers are likely to spend more with less disposable income unless they are taking out all their savings. But in view of the current austerity measures families are more likely to try to cut even by the end of the month, or to save if they manage to put aside something, then go on shopping bonanzas.

I would prefer to be guided by what the GRTU had to say as soon as the government announced the introduction of the new utility rates. In the words of the GRTU chief Vince Farrugia “The revised water and electricity rates make Malta’s tariffs the highest in Europe and will result in a 49 per cent increase for businesses... such high tariffs, announced a week ago, would force many businesses to raise prices, lay off workers or even shut down, adding that the GRTU would support any action at the level of the Malta Council for Economic and Social Development that demonstrated solid objections to these tariffs”. (The Times, 22 December, 2009).

Thank you. Like Vince I prefer to keep my feet firmly against the ground than try to fathom euphoric statistics.

Having mentioned GRTU chief Vince Farrugia in this article I would like to refer to a frontpage story published on TMI On Sunday of 14 March called Vince Farrugia’s battered face too dramatic to show, wherein it was reported that various MPs expressed their solidarity with Mr Farrugia. It went on to mention names specifically. For the record I would like to mention that I had personally called Mr Farrugia while he was still in hospital to personally express my solidarity too.

Dr Gavin Gulia LL.D., M.P. is the Opposition’s main spokesman for the economy and self-employed