The Malta Independent 1 March 2021, Monday

TMID Editorial: Economy - On business scepticism and the GDP

Monday, 22 February 2021, 09:15 Last update: about 7 days ago

With almost a year having passed since the first case of Covid-19 landed in Malta and with the vaccination programme in full swing, many – not least those in the business community – have turned their eyes to the recovery from the pandemic.

While we have seen a number of economic forecasts predicting a strong bounce back for Malta’s economy in terms of gross domestic product (GDP), last week saw the publication of an interesting report by the Malta Chamber of Commerce, Enterprise, and Industry, which should be applauded for such an initiative, which seemed to buck that positive trend.

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This report found that Maltese businesses appear to be more sceptical about improve their profitability than their foreign counterparts, with only 38% of 105 CEOs surveyed saying that they expected an increase in profits in the next year.

For comparison, 55% of CEOs in the United States expect their firm’s profitability to increase in the next 12 months, and that figure increases to 65% when analysing CEOs in the United Kingdom.

People are hopeful – although it was found to be more cautious hope than anything else – but there is a bit more scepticism when compared to other countries.

This is an interesting metric – not least because it is the first time that such a confidence survey has been undertaken.

It has long been suggested that perhaps using the country’s GDP is not necessarily the best way – or at least shouldn’t be the only way – to measure one’s economy and prospects for growth, and this survey does back that theory up somewhat.

We say this after taking into consideration that a number of forecasts have estimated that Malta’s GDP will not only bounce back in the post Covid-19 recovery era, but that it will be doing so with one of the strongest rates in the whole of Europe.

Is this to say that the said forecasts are wrong? No, not at all.  For all we know, they may turn out to be correct and Malta’s GDP may indeed increase at the highest rate throughout this year and the next.

However, this does suggest that there is more to the economy than just the GDP.  If it were just the GDP that mattered, then CEOs should be brimming with confidence about increasing their profits in the coming year, given what the said forecasts are saying.

And yet, they are not, and we need to understand why.

The pandemic has given us a lot of opportunity for introspection and much has been said about not wanting to go back to pre-pandemic ways.  Understanding why key business stakeholders may lack confidence in return to profit – and understand what would give them confidence – has to be a part of that introspection.

This is yet another area where there is a good opportunity for a re-jig in the framework of how this country functions.

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