One understands how a government finds itself under great pressure to demonstrate that the conduct of affairs is proceeding without too many problems. However when the problems being faced cannot be kept under total control because they arise from outside independent factors, I believe that any government must be careful not to give too soon the impression that matters are leading to a successful outcome.
Such a requirement will becomes crucial at budget time. We find ourselves even now in a very good position to contain the shocks which the pandemic has given and will continue to deliver to the Maltese economy – which encourages the belief that eventually we shall successfully exit the crisis. Personally, I have no doubt that we shall do so.
However the way forward might be longer that one could wish or predict. In the forthcoming budget, it would be wise not to encourage high hopes that might turn out to be false or to expend too many of the available reserves too soon, even if this might disappoint those who wish to go fast. Chances are not slight that for economies such as ours which depend a lot on service industries, the negative effects of the pandemic could be prolonged.
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MALTA IN RED
In past weeks, according to the classification that has been adopted in different European countries, Malta’s public health position vis à vis the corona virus pandemic alternated between amber and red. That change of colour changed too the reception travellers from a given country got when they arrived elsewhere. Still, in the second wave that is now prevalent, the infection rate all over Europe has increased so much that it is difficult to say whether these “colour” distinctions have remained so relevant.
What is clear is that they are disrupting travel patterns within the Schengen zone, which was supposedly established to ensure free movement of people right across its territory. When the pandemic is over, a radical review of how the Schengen system works out should be considered imperative.
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MORE ON INFLATION
When last Monday, European Central Bank governor Christine Lagarde addressed the European Parliament’s economic and financial committee, she stated that her experts were forecasting the following inflation rates for the EU: 0.2 per cent this year followed respectively for 2021 and 2022, by 1 and 1.3 per cent.
These figures put the searchlight once again on the price scenarios not just in Europe, but globally. It is true that we are in the grip of a huge recession triggered by the public health crisis. But the scenario of stagnant and even declining price levels has been around for a number of years. This went on while central banks – including the ECB – continued to pump enormous volumes of cash into economies.
As of now, there is no satisfactory explanation as to why this has been happening. Yet still, the same fiscal and monetary policies have been rolled over from period to period in line with currently held dogmas although there has been little to no variation in outcomes from period to period.