The Opposition has been arguing for some months that we are living a “Made in Malta” recession. When I first heard this, I was startled, as the European Commission had just announced that Malta would be the fastest growing EU economy. This prediction was impossible to reconcile with the Opposition’s forecast of two consecutive quarters of declining GDP – the technical definition of a recession.
This theory is even more astonishing in view of Moody’s latest confirmation of Malta’s rating of A2 stable, opining that our country has a “track record of strong economic growth in recent years and elevated per capita income levels”, going further to state that in 2019 the Maltese economy grew by 5.1% which “would represent the highest rate of growth in the EU”.
Therefore, with Moody’s latest credit opinion, it is good to note that within one month, the country has received significant positive international certificates from independent agencies as well as the European Commission, a fact which further disproves the Opposition’s false claims. In fact, in its report the European Commission said “Malta’s economic performance is expected to remain buoyant”.
For the sake of clarity, it would be beneficial to dissect the Opposition’s definition of a ‘recession’. Therefore, while we have to wait till end February for official GDP data for the last quarter of 2019, which I am sure will further debunk this recession theory, I would like to comment on some indicators that have been issued covering the months of November and December – two months of economic distress according to the Opposition.
The US National Bureau for Economic Research studies five indicators between GDP data releases. These are household income, employment, manufacturing output, retail sales and measures of sectoral activity. I will try to analyse similar indicators for Malta.
Let us start with household income. Maltese households held €12.8 million bank deposits in October. By the end of December these deposits had grown to a record-breaking €13.1 million. This marks an increase of €282 million. In December the annual rate of growth in bank deposits stood at 6.6%, up from 6.2% in October. The increase seen between October and December 2019 was more than double the increase seen in the same two months in 2012. For me this is clear evidence that household income continued to grow very briskly during the last two months of 2019.
Some would counter by saying that households may have been saving, but this reflected postponed consumption due to uncertainty. Once again, however, official data disproves the argument. A recent Eurostat news release indicates that Malta experienced the third-highest increase in retail sales in December 2019, with a rise of 5.6% over the same month a year earlier. This was nearly three times the rise seen across the rest of the EU. It also followed a 3.5% rise observed in November. In the same months of 2012 Eurostat reported a rise of 0.4% and 1.6% for retail sales in Malta, that is some four times less than the rise seen in 2019.
Another clear indicator of a recession are trends in unemployment. The number of those registering for work in December stood at 1,642, down from 1,666 in October. Back at the end of 2012 we had over 6,800 persons registering for work, or four times as many as last December. In December 2019 the number of persons who had been unemployed for more than a year continued to decline, and there also was a fall in youths registering for work. Eurostat’s measure of unemployment for Malta was 3.4% in October and remained stable till December, at one of the lowest rates in our nation’s history. Back in December 2012, Malta’s unemployment rate had stood at 5.7%, or more than one and a half times our current rate.
Manufacturing is faring quite badly globally, as trade tensions are putting in jeopardy many exporters’ plans. Industrial production across the EU has been falling, with Eurostat releases showing declines of between 4% and 6% even in Germany. Here in Malta our nimble manufacturers have managed to increase their production in November and December, by 0.1% and 7% respectively. Moreover, in a recent survey carried out by the European Commission, Maltese manufacturing firms, on average, said that they had orders sufficient for an unprecedented 12 and a half months of production.
I would like to refer to another set of important official statistics, namely those on tourism. In November the number of tourist arrivals rose by 8.3%. This was followed by a 17.9% increase in arrivals in December, making it one of the best months for tourism in our nation’s history. More than a third of a million of tourists visited us in the last two months of 2019. In 2012 during the same two months we received about 150,000 tourists, or fewer than half the amount in 2019. To top it all up, this economic success is confirmed by the European Commission through its Winter Forecast Report which stated that Malta’s economic performance is expected to remain strong with an economic growth that surpasses all the other European peers.
I am sure that the Opposition will continue harping about lies and statistics, but any rational observer would concur that of all the issues that could be affecting our economy, a “Made in Malta” recession is surely the least probable. What is most probable is the complete financial crisis that hit Tal-Pietà after recent reports that the PN finances are in the red with €34 million, a situation which shows the sheer financial irresponsibility and lack of their economic vision.
As Minister for the Economy I am quite aware that instead of the phantom recession the out-of-touch Opposition grumbles about, the private sector is facing the pressures of a very fast-growing economy, namely scarce availability of workers, a skills gap, access to finance and infrastructure constraints. Over the next months these issues will be continued to be addressed to ensure that our economy remains the most dynamic in Europe whilst businesses continue to flourish and achieve their potential.
Silvio Schembri is Minister for the Economy, Investment and Small Businesses