The data for last year`s gross domestic product (or the national cake, as we have affectionately grown used to refer to it) brought the usual comments as to whether Malta`s economic performance is good or not and about the management of Malta`s economy. One must appreciate at the outset that the manner of measuring GDP has been changed in recent years and therefore comparisons with years prior to 1994 cannot be drawn.

The striking feature of the 2001 data is that the GDP in real terms (that is, after accounting for inflation) went down by one per cent in 2001 when compared to 2000.

This had not happened in the previous four years and, therefore, may have sounded as a bit of a shock to many. In fact, there is no doubt the international economic situation has not been healthy for the last 18 months and this has impacted greatly on our economic performance.

The issue may be whether we could have performed better and whether the trends that emerge about the different sectors of the economy are generally positive.

To think that one could not have performed better is presumptuous. However, to state that economies, to which we normally compare ours, have fared much worse is very fair.

We have often been critical of ourselves because our economy has not grown at the same rate as that of countries in South-East Asia. If this self-criticism were correct then we have to congratulate ourselves that our performance during 2001 was much better than that of these economies; and the drop of seven per cent in the GDP of Singapore is a very good example of this.

Moreover, any student of economics would understand the link that exists between markets and economic growth. When your markets grow and you sell more, this translates into economic growth. If your markets shrink and you sell less, this translates into negative growth.

This is what happened to all economies that rely heavily on the export of goods and services for their economic growth, Malta being no exception. Even so, in real terms, exports of goods and services still represented 88 per cent of the gross domestic product, down from the 91.8 per cent of 2000 but up from 84.2 per cent of 1997.

This data reflects this increased reliance of our economy on exports and that the economic slowdown of last year was a reflection of the very weak international economic situation.

That covers the wider context in which we have to view our GDP performance. Then there are two components of GDP by category of expenditure that provide an indication of the domestic economy.

Let us not forget the economic gloom that some are claiming to exist. Unfortunately, these have confused perceptions with reality. No one can doubt that business confidence among operators that serve the local market is quite low; but business confidence is based on perceptions and it emerges that this negative feeling is very much self-induced and does not correspond with the economic data.

The economic data shows quite clearly that consumers` expenditure in real terms has increased by Lm1.6 million during 2001. This increase is far lower than that experienced in the previous two years, but to claim that domestic demand is shrinking is a far cry from the truth.

Another interesting component is investment in construction. During 2001, this increased by Lm9.1 million in real terms, an increase of 8.7 per cent over 2000, after that it had increased by 6.5 per cent in that year over 1999 and after that it had decreased by 17 per cent in the three years up to 1999.

Moreover, whereas consumer expenditure represented 61 per cent of GDP in 1997, in 2001 it represented 63.4 per cent.

Looking at GDP at factor cost, the National Statistics Office gives a breakdown of the employment income component and of the profit component. In fact, this is what led to the reference of the national cake - that is the share of employment income of the gross domestic product, hence the share of the workers of the national cake.

In 2001 it reached nearly Lm725 million, 52.7 per cent of GDP, up from 50.4 per cent in 2000. It stood at 51.9 per cent of GDP in 1997; again data that continues to show that workers are more than just maintaining their share of the national cake, in spite of what is claimed.

The data on GDP at factor cost also gives a breakdown of the contribution made by each sector to economic growth. The sectors that rely more heavily on the local market are those sectors that increased their contribution; again a result that is tied strictly with the difficult international economic situation.

The real chunky drop came in the manufacturing sector, with the main decrease occurring in the profits component of GDP rather than the employment income component - a proof of the resilience of this sector.

Another interesting development is the contribution of the public sector to GDP. Trends become important here. In 2001 public administration and government enterprises contributed 22.6 per cent to GDP at factor cost. This is higher than the contribution made by these same two sectors in 2000, but is down from the level of 23.3 per cent level reached in 1997.

So over a number of years one is also noting an element of retraction of the state from the direct operation of economic activities.

I would like to reiterate that it would be presumptuous to think that we could not have done better. However, given the wider global context, the trends that emerge provide positive indications. On this basis, it is equally positive to note that an EU report expects the growth rate in the coming years to be at around three to four per cent, that is at the level we have experienced in the last five years.

However, this report also points out that in order to achieve this result it is considered to be "crucial" that we maintain our external competitiveness. In effect, our future national cake appears to hinge exclusively on this essential ingredient.