Prime Minister Lawrence Gonzi struck a positive note the other day when he said the economy was still steaming ahead despite the uprising in Libya. At the same time, however, he warned, quite logically, that the country had to be cautious because the situation was very fluid and unstable. The economy may still be steaming ahead, but, realistically speaking, it will not be long before the impact will start to be felt unless, of course, other economic sectors, that is, sectors that have no interest in the Libyan market, raise their contribution to make up for the loss expected from the suspension of business with Libya.

Hopefully, the suspension will not take far too long but, since there does not appear to be the slightest indication yet that things will get back to any semblance of normality any time soon, it is likely the cost will add up to a significant amount. It is not only firms that export to Libya that have been hit but also engineering contractors, providers of services and people who have held jobs there in various sectors, not to mention those who worked in the oil industry. No assessment appears to have yet been made as to how much the impact will cost the economy and details of all the interests held by Maltese in Libya are hard to come by, if it all.

The Prime Minister said that, while Maltese companies and workers in Libya had been hit hard by the unrest, industrial indicators were showing positive results for the rest of the economy. He was quoted saying: “The government is keeping an eye on industrial indicators such as the importation levels of raw materials used by factories and these are showing the economy is still moving forward.” This, and also Dr Gonzi’s unbounded optimism that the island would be able to overcome the crisis in the same way it did when it was hit by the economic recession, is all very well.

But if the crisis persists for long, one of its cumulative effects may well be loss of revenue for the government, which, in turn, could upset its plans to bring the deficit down to the level required by the European Union. That is, unless, as remarked earlier, other sectors of the economy make up for the loss the economy suffers from the Libyan crisis.

Some 300 people are known to have held jobs in Libya on a permanent basis but how many actually worked in the oil industry? If all of these, or most of them, have joined the ranks of the unemployed, it would also mean the government would have to fork out more in unemployment benefit. It is most unfortunate that the crisis has come about just when the government appeared to be taking a firm hold of its financial situation.

In fact, only last January, the European Commission suspended its excessive deficit procedure against Malta as it believed the government was on the way of meeting its target for the year, though it still had to tackle some long-term issues. The government’s aim for this year is to bring the deficit down to 2.8 per cent of gross domestic product but it remains to be seen if, in view of the latest crisis, the government would be able to meet the target. Maybe through the right kind of action and increased contribution from other sectors, the impact would be minimised.