The World Bank recently warned leading central banks that by simultaneously raising interest rates to combat inflation the world may be edging closer towards a global recession.
World Bank president David Malpass said: “Policymakers should shift their focus from reducing consumption to boosting production, including efforts to generate additional investment and productivity gains”.
The message is clear, increasing interest rates to combat rising inflation will create more problems for the global economy as it will drastically impact growth. The solution lies in increasing productivity and boosting competitiveness through investment to generate more growth, if the global economy is to weather the storm caused by the pandemic and now the war in Ukraine.
Malta in no exception, our open economy is vulnerable to external shocks and if the global economy falls into a recession, it will surely have a negative impact on our exports and services.
We cannot rest on our laurels and do nothing; on the contrary we have to do more. The government is cushioning the impact of energy prices, gas and fuels at the pump and this is helping our competitiveness and at the same time helping families to make ends meet.
However, competitiveness does not simply mean controlling costs, or to put it bluntly controlling wages, as some employers think. Competitiveness also entails products meeting customer needs, continuous market research and development, investment, good quality products and services.
Increasing interest rates to combat rising inflation will create more problems for the global economy- Victor Carachi
The perfect example of how this is achievable is the German automobile or white goods industries. While their products are more expensive than those of their competitors, they still manage to sell their products and pay good wages to their employees.
The same could be said of Japanese products. Both countries have built an excellent global reputation for the quality of their products which consumers are ready to pay a premium for.
As regards our tourism product more needs to be done to attract additional five-star tourists to our shores.
The Malta Tourism Authority has to be commended for devising such a plan to achieve this objective, yet the MTA cannot do it alone; the whole country is our tourism product not just five-star hotels or restaurants and the service they provide.
What the country needs is a holistic strategic plan and vision that goes beyond electoral manifestos for the next 10 to 15 years that covers all major sectors of our economy, the environment, transport, education and health.
The plan should be to upgrade the quality of life of our citizens, and this can only be achieved through a strong and sustainable economy, first-class education and health systems and equally important total respect for the environment – when measuring the quality of life economic well-being and a healthy lifestyle are on an equal footing.
Once the vision and strategy are endorsed by all social partners, an entity has to be identified to manage the implementation and coordination between various government departments, public entities and other stakeholders.
If we are to have a sustainable and competitive economy, we must plan ahead as a country. All stakeholders, such as the business community, trade unions, NGOs and the public should know where the country is heading and how and when we are going to get there.
Victor Carachi is president of the General Workers’ Union.