Malta’s economic model faced a veritable stress test due to the COVID-19 pandemic. Many had forewarned that restrictions on tourism and other services would result in thousands of firms closing down and lead to record high unemployment.
On the contrary, and despite the pandemic lasting much longer than initially expected, the Maltese economy proved its resilience and managed to continue creating thousands of jobs while keeping unemployment at a record low.
The first 100 days of this administration were faced with yet more challenges and tests to our economy. The rise in commodity prices, particularly energy prices, has led to inflation rates reaching unprecedented levels in many European nations. And, similar to the early days of the COVID-19 pandemic, many were those who said that the government will not be able to shield businesses and families from these external pressures.
Although inflation has increased in Malta, we still remain outliers as our inflation rate stands at two-thirds of the EU average. The last time our economy faced an inflation rate at par with that faced today was in 2008, when our inflation rate was one-and-a-half times the EU’s level average. In comparison, however, the 2008 administration chose to increase price pressures on citizens.
Today’s government, on the other hand, is intervening to help its citizens. In fact, effective government policy, particularly in the energy sector, is definitely the main reason why Malta remains the country with the lowest inflation rate in Europe as electricity, gas and fuel are raising the overall inflation rate by nearly four per cent.
Some may argue that this result comes at the cost of financial sustainability. Yet, fiscal data up to May this year shows that the deficit on the Consolidated Fund is less than three-fifths what it was in the same period last year. The government’s actions to protect consumers’ spending power and businesses’ competitiveness are yielding results.
Moreover, the government’s economic policy is safeguarding our nation’s economic productive capacity, just as it did during the pandemic. And, at 3.1 per cent, the unemployment rate is at the lowest level ever recorded while dependence on social assistance is nearly a tenth less than it was before the pandemic started.
At 3.1%, the unemployment rate is at the lowest level ever recorded- Cressida Galea
In these first 100 days, despite the ever-worsening geopolitical situation and the deteriorating global economic situation, international institutions have continued to issue positive reports on our nation’s economic prospects. The European Commission is forecasting that domestic demand and investment will continue sustaining our economy, resulting in economic growth exceeding four per cent over the next couple of years.
International credit rating agencies have reaffirmed their excellent credit rating for our country and welcomed the economic policy continuity and institutional reforms that they believe will take place as a result of Robert Abela being given an electoral mandate.
While recognising the challenges arising from the war in Ukraine and the changing international economic situation, they have all concurred that Malta’s economic growth will remain robust in the coming years. Indeed, the reason for this has been our nation’s track record.
Experts agree that our economy has recovered faster from the pandemic than initially expected. Thanks to the government’s support packages, affected industries retained their productive capacity and are now able to take advantage of the recovery of the tourism industry. On the other hand, the success of our new digital sectors has become even more impressive.
Furthermore, our gaming and financial sectors did not face an exodus as a result of the FATF decision to place Malta under increased monitoring, despite the fears and concerns at the time.
Rather, the committed, professional and effective approach with which the government implemented the agreed action plan, reassured investors and confirmed that Malta remains an excellent and exemplary jurisdiction.
The first 100 days of this administration have not just marked economic policy continuity. They have also showed that the change in priorities and direction which started in the beginning of 2020 is going to be a long-lasting development. The five pillars of Abela’s economic vision are becoming even more embedded in day-to-day policymaking.
The government will inevitably allocate considerable resources to shield the economy from short-term challenges, as was done during the pandemic. However, it will not lose track of what is crucial for Malta’s economic model to progress to its next stage of development.
Infrastructure, education, quality of life, governance and climate-neutrality will remain at the forefront of government policy.
Cressida Galea is a Labour MP and an economist.