Breathtaking benchmarks
The substance of the article by Gordon Cordina in The Times Business of January 17 had been well known for quite some time. The way Dr Cordina strung it together, with the help of the Federation of Industry, made riveting reading. It offered a...
The substance of the article by Gordon Cordina in The Times Business of January 17 had been well known for quite some time. The way Dr Cordina strung it together, with the help of the Federation of Industry, made riveting reading. It offered a framework within which to place the economic debate, which is becoming a keystone in the electioneering leading up to the general election.
The debate centres on two resoundingly opposite replies to a simple question: Is the economy doing well? Certainly, yells the government side. Not really, screams the opposition.
As jesting Pilate asked: What is truth?
Malta's foremost economist provides the answer. He records that it is apparent that the medium-term growth performance of the Maltese economy shifted upwards in 2005, probably due in good part to the reduction in the fiscal deficit, which had stimulated demand artificially without proportionately expanding the economy's supply capabilities.
How, then, has Malta been faring, relative to relevant and corresponding benchmarks?
Dr Cordina gives a pithy answer: The medium-term rates of growth observed in the Maltese economy since 2005 are similar to the average of Cyprus, Greece, Portugal and Slovenia, the EU member states with a level of development most comparable to that of Malta in terms of per capita GDP. He notes that the recovery in growth in Malta in part mirrors developments in the EU27 economies, which account for a substantial part of the demand for Maltese exports.
These indicators point to a situation where economic growth in Malta, while recovering to reasonable levels, is not making significant headway by international standards. So, what does that imply? Simple arithmetic: At current rates of growth, in the light of the fact that Malta's per capita GDP is just under 75 per cent of the EU average, it would take around 30 years for the Maltese economy to catch up with EU average levels of per capita GDP. That outlines a graphic picture which Dr Cordina proceeded to fill in.
"Other indicators concerning the supply-side performance of EU member states compiled by Eurostat within the context of the Lisbon Agenda attest to improvements achieved by the Maltese economy over the medium term while indicating a pressing need for further progress," he wrote, going on to provide some defining indicators:
● labour productivity per person employed in Malta improved from around 85 per cent to over 90 per cent of the EU average between 2001 and 2007 - but the island remains in the 15th position among EU member states in this regard;
● the percentage of the population in employment improved from 54.3 per cent to 54.8 per cent in Malta between 2001 and 2006 - but Poland is the only EU member state which fares worse on this indicator;
● in spite of the significant narrowing of the fiscal deficit, 15 other EU member states have a more favourable position than Malta;
● the percentage of the working age population participating in life-long learning has improved from 4.6 per cent to 5.5 per cent between 2001 and 2006 - but Malta remains in the 18th position among EU member states in this regard;
● the percentage of youths with at least an upper secondary education level has increased substantially from 40.1 to 50.4 between 2001 and 2006 - but Malta remains in the place before the last among EU member states on this indicator;
● expenditure on research and development in Malta has advanced from 0.3 per cent to 0.6 per cent of GDP between 2002 and 2005 - but Malta is in the 17th position among EU member states in this regard.
There lies the reply to Pontius Pilate's penetrating question. The truth is that Malta is doing well but not well enough. It requires much enhanced economic progress. To begin to achieve that, "significant challenges remain to be faced".
Such as? "The most important among these challenges relate to the need to improve labour productivity and participation in the labour force and to enhance expenditure on research and development."
In essence, that is what the political parties should be addressing. Seriously. Urgently.
They should tell the people how they propose to do so.
Will they?
Don't hold your breath ...
The debate centres on two resoundingly opposite replies to a simple question: Is the economy doing well? Certainly, yells the government side. Not really, screams the opposition.
As jesting Pilate asked: What is truth?
Malta's foremost economist provides the answer. He records that it is apparent that the medium-term growth performance of the Maltese economy shifted upwards in 2005, probably due in good part to the reduction in the fiscal deficit, which had stimulated demand artificially without proportionately expanding the economy's supply capabilities.
How, then, has Malta been faring, relative to relevant and corresponding benchmarks?
Dr Cordina gives a pithy answer: The medium-term rates of growth observed in the Maltese economy since 2005 are similar to the average of Cyprus, Greece, Portugal and Slovenia, the EU member states with a level of development most comparable to that of Malta in terms of per capita GDP. He notes that the recovery in growth in Malta in part mirrors developments in the EU27 economies, which account for a substantial part of the demand for Maltese exports.
These indicators point to a situation where economic growth in Malta, while recovering to reasonable levels, is not making significant headway by international standards. So, what does that imply? Simple arithmetic: At current rates of growth, in the light of the fact that Malta's per capita GDP is just under 75 per cent of the EU average, it would take around 30 years for the Maltese economy to catch up with EU average levels of per capita GDP. That outlines a graphic picture which Dr Cordina proceeded to fill in.
"Other indicators concerning the supply-side performance of EU member states compiled by Eurostat within the context of the Lisbon Agenda attest to improvements achieved by the Maltese economy over the medium term while indicating a pressing need for further progress," he wrote, going on to provide some defining indicators:
● labour productivity per person employed in Malta improved from around 85 per cent to over 90 per cent of the EU average between 2001 and 2007 - but the island remains in the 15th position among EU member states in this regard;
● the percentage of the population in employment improved from 54.3 per cent to 54.8 per cent in Malta between 2001 and 2006 - but Poland is the only EU member state which fares worse on this indicator;
● in spite of the significant narrowing of the fiscal deficit, 15 other EU member states have a more favourable position than Malta;
● the percentage of the working age population participating in life-long learning has improved from 4.6 per cent to 5.5 per cent between 2001 and 2006 - but Malta remains in the 18th position among EU member states in this regard;
● the percentage of youths with at least an upper secondary education level has increased substantially from 40.1 to 50.4 between 2001 and 2006 - but Malta remains in the place before the last among EU member states on this indicator;
● expenditure on research and development in Malta has advanced from 0.3 per cent to 0.6 per cent of GDP between 2002 and 2005 - but Malta is in the 17th position among EU member states in this regard.
There lies the reply to Pontius Pilate's penetrating question. The truth is that Malta is doing well but not well enough. It requires much enhanced economic progress. To begin to achieve that, "significant challenges remain to be faced".
Such as? "The most important among these challenges relate to the need to improve labour productivity and participation in the labour force and to enhance expenditure on research and development."
In essence, that is what the political parties should be addressing. Seriously. Urgently.
They should tell the people how they propose to do so.
Will they?
Don't hold your breath ...