The Coronavirus has certainly taken its toll on Malta’s economy but with restrictive measures now being gradually lifted, there is cause for optimism that things will return to some normality.  The road ahead is not without its difficulties, however. The financial package may still be required for a number of months in some sectors such as tourism and manufacturing. In tourism we depend on decisions taken by individuals, tour operators, commercial airlines, and companies based or operating abroad. They too have been affected by the crisis and hence it will be a while before tourist numbers and import orders by overseas clients of manufacturing concerns reach anywhere near the levels we had prior to the crisis.

To this end it is necessary to formulate sector by sector plans with information flowing from representatives from each sector to government to identify further support measures including non-financial initiatives to help with economic recovery. Whereas the involvement of social partners will be crucial in future decisions taken by government, now is the time for “big government” and by this I mean government taking a leading role in setting economic direction. This is not to say that the market should necessarily be dictated to, but this crisis has again proved the economist John Maynard Keynes right. When faced with an economic crisis it is incumbent on government to intervene and it should be government that takes a leading role to set the future course for our economy with the involvement of social partners of course.

No doubt it will take time for the economy to return to pre-Coronavirus levels. However, this presents an opportunity to revisit key economic sectors which have proved especially vulnerable in the present crisis. This is not to say that such sectors like tourism should become less important for our economy, on the contrary, every effort must be made to ensure that they continue to flourish.

Nonetheless, I believe that this crisis has shown that the Maltese needs to depend more on sectors that are more resilient to asymmetric shocks. This is not a bad thing per se, as some sectors have been growing beyond levels considered to be sustainable. I believe construction is very important for our economy but in the current context there needs to be more emphasis on quality development, visual impact and aesthetics. In fact, the key word for any type of investment should be “quality”.

The connectivity between our islands and the rest of Europe and North Africa will also need to be prioritised with immediate effect. I believe that a broader Connectivity Master Plan is required for Malta, particularly as I expect the flow of travellers to pick up when a vaccine is available for the wider public. This Master Plan would adopt a holistic vision for travel and transportation, mapping out the links between transport sectors and other businesses that rely on Malta’s connectivity, and will focus on multiple modes of transport including sea travel, in order to create new niches of opportunities for domestic operators within the sector and take advantage of Malta’s natural strengths. 

As I look towards the after-effects of this crisis and subsequent recovery, one thing that resonates is the importance of having a diverse economy built on several key economic sectors in order to foster resilience. Malta has made remarkable strides in recent years in terms of actively seeking out new economic sectors linked to the digital economy and strengthening existing ones such as financial services. Such efforts must now be amplified and increased, with the focus being on high-value added investment such as blockchain, artificial intelligence, quantum, internet of things and digital innovation hubs: investment that can create new job opportunities and business in line with the aforementioned focus on sustainability and quality. The digital economy could pick up the slack left by a re-dimensioned tourism and construction where demand is likely to fall in the aftermath of Coronavirus.

Against this background, the role of the Parliamentary Secretariat for Financial Services and Digital Economy will evidently assume greater significance in designing effective strategies to further diversify our economic portfolio and reduce the risks of relying too heavily on tourism and construction. Further investment in our research and development capability using EU funding as envisaged in the new Multi-annual Financial Framework will also be a boost to our economy.    

Yes, the Coronavirus has negatively impacted our economy but investment in the digital economy will probably be the single most important driver of innovation, competitiveness and growth, and it holds huge potential for Malta-based entrepreneurs and small- and medium-sized enterprises. Digitalisation needs to be exploited further. This is not only about engaging with customers online. The digital economy will radically change the business landscape, reshaping the nature of work and the boundaries of enterprises. All this presents huge opportunities for economic renewal and business leaders.

Dr Philip von Brockdorff is head, Department of Economics within the University of Malta