Last week, this newspaper reported the speech given by Tom Rogers, Senior Economic Advisor to the Ernst & Young Eurozone Forecast at a conference organised by EY Malta, prior to the one held yesterday.
While the EY Forecast for Malta, unveiled at that conference, was quite optimistic and promising, Mr Rogers added some words of warning.
He termed his warning with the words 'Clouds over Malta'.
In essence, as he sees it, since Malta escaped the mass unemployment and austerity of other countries, it may lack the motivation to change more to enhance its competitiveness. Other countries which passed through a more brutal recession than Malta, have more motivation to change and improve.
Mr Rogers specified what he meant by clouds over Mala:
- Low labour participation. Malta was in the second lowest place in 2008 in the Eurozone and it is still in the second lowest place despite having improved from less than 60% to 65%.
- Infrastructure ranking. According to the World Economic Forum's Competitiveness Ranking, Malta ranks lower than Portugal and Spain. If it really wants to grow, Malta must climb up this ranking.
- Cost of aging. Social security spend and health spending will inevitably increase with demographic changes. Worse than Malta there are only Luxembourg and Cyprus.
- Productivity is middling, as regards output per person. It is good to have more people in employment, but unless there is investment thrown in, they will only create low productivity.
Concluding, Mr Rogers asked whether Malta is diversified enough. He focused on financial services which accounts for 50% of GDP growth and pointed out some clouds possible in the future as Europe takes steps to centralise financial services.
As we move towards Budget Day, and the government's economic programme, we must all be aware that unless we tackle the fundamentals, as exemplified in Mr Rogers' warning, we risk spending time and money and also political capital on issues that may serve to alleviate some of the concerns but which ultimately lead nowhere.
Some issues regard Malta's demographic situation, which is that of an ageing society. At the EY conference, Minister Scicluna seemed to temper this by pointing out that the influx of asylum seekers (who presumably will remain here) and high-network individuals (apart from the incoming tide from EU countries with worse unemployment than ours) will limit the impact of an ageing society.
But other issues have proved over the years to be nearly intractable and may even be getting worse.
While on the one hand, the level of female participation in the economy has increased, this is still at EU negative levels.
So too the level of productivity in general. The working section of the population in private industry has to carry the weight of a big administration which is actually getting bigger. The concentration on reducing the number of unemployed, which is the obverse to the pushing more people into government service, has allowed us to take off our eyes from any kind of productivity improvements. It would seem that nationally, increasing productivity does not feature anywhere in the national consciousness.
Time and again, successive governments have boasted of cutting the unemployment figures but rarely of increasing productivity. Hence our disappointing place in international statistics goes from bad to worse.
This too can then explain our Third World levels as regards infrastructure. The state of our roads is just an example. We do not plan long term, we lack the resources and the political will to take strategic decisions which may be hard at first but which will eventually deliver returns.
Mainly, however, we must all focus on the job ahead and beware of facile conclusions and easy-going optimism that we are Europe's best and ahead of everyone. If we stop from this orgy of self-congratulations we may see that in so many aspects we are not Europe's best, by far.