Recovery possible by third quarter - Finance Minister

Finance Minister Tonio Fenech yesterday said recovery from the current economic downturn was possible by the third quarter of the year.

He insisted that although the global recession would cause problems for Malta, the economy was not in crisis and one had to be careful not to alarm people unduly.

He also said that keeping to a deficit target of less than three per cent was still an important target for the government but given the unstable economic scenario it would not be "dogmatic" about the issue.

Mr Fenech was briefing the media at the end of a meeting of the Malta Council for Economic and Social Development, which was presided over by the Prime Minister at Castille. The MCESD partners were given a briefing of the current situation, which included a sectoral analysis.

The Minister said that manufacturing, particularly those linked to the car and heavy industries, and tourism were the two sectors most hit by the recession.

However, he also pointed out that the fact companies opted for a reduced working week rather than lay-offs was also a sign that they were seeing positive prospects later on in the year.

A recovery was possible by the third quarter this year, with the more pessimistic predictions pointing towards the first quarter of 2010.

He reiterated the government's intention to remain flexible on the deficit but insisted it was not in the country's interest to overshoot the target of three per cent.

"Increasing the deficit beyond the three per cent mark could lead to credit rating agencies lowering their rating for Malta and that would be a disaster for investment," Mr Fenech said.

The government was reviewing the situation on a daily basis and would be prepared to take measures, including injecting more funds, to alleviate the burden on particular sectors.

Asked whether the government would consider a proposal by the Malta Employers' Association to subsidise, for a limited time, the wages of those employees working a four-day week, Mr Fenech said it was studying all proposals put forward by the social partners.

As expected, the impact of the higher utility tariffs was also raised during the meeting, with the GRTU demanding they be reduced immediately.

The government did not budge from its position insisting the tariffs will be reviewed every six months with the next revision due in March.

Mr Fenech said the prospects were that tariffs would drop in line with the falling price of oil.