Consumption of a wide range of goods and services is expected to fall by around 81 per cent as long as Malta has ongoing COVID-19 infections, an economic report by former prime minister Joseph Muscat says.
Even after easing most restrictive measures, most people will still be reluctant to travel, dine out in restaurants, hail taxis, and venture back into retail stores, the 11-page document says.
This is the second of Muscat’s analyses on the impact of the coronavirus on the economy.
On May 5, Times of Malta reported that Muscat was among a small group of people advising the government on how to manage the country’s economic recovery.
Muscat had resigned from office back in January amid unprecedented pressure to step down following growing concerns over the suspected links between his office and the murder of journalist Daphne Caruana Galizia.
The economic note includes the findings of a telephone-based survey conducted by data cruncher and Labour Party pollster Vincent Marmara during the second week of May.
The survey questioned 600 people in a representative sample.
The findings show that even when opening up of most restrictive measures occurs, economic activity in Malta is expected to fall considerably as the Maltese would prefer to wait for the availability of a vaccine.
And, even if a vaccine is made available to the public, consumption is still expected to be lower compared to before the pandemic outbreak.
The document says the findings highlight the importance of “devising correct economic incentives” to increase household spending and bolster consumer confidence.
This is especially true when it comes to the perceived safety of establishments.
The note also warns of a shrinking labour force. The permanent effects on consumption forecast by the survey, together with a general tendency to avoid sending children to childcare facilities, might indicate that some households are considering dropping out of the labour force, at least partially, the document says.
There are also indications of a gender imbalance when it comes to the effect of the pandemic, with women being hit disproportionally by the economic downturn.
Any financial incentives, the report says, would need to be complemented with clear guidelines and mitigation measures to help reassure the public of the safety of going out.
Respondents have indicated that during this period when businesses start reopening, they are most likely to cut consumption of services and activities that are seen as posing the highest risk of contagion, that is, activities that bring them in close proximity to other people.
These include holidays abroad (with average frequency falling by 93 per cent) hotel breaks in Malta and Gozo (with a drop of 90 per cent) and farmhouse breaks in Gozo (falling by 87 per cent).
Considerable decreases are expected to be registered in the use of public transport and restaurants, which are expected to fall by more than 80 per cent even after the lifting of restriction measures.
Retail activities, coffee shops and the use of ride hailing services are expected to be affected slightly less during this period.
Respondents also indicated that once a vaccine becomes available, they intend to significantly boost the consumption of all activities.
Nevertheless, despite the significant pick-up in economic activity that is seen after the discovery of a vaccine, respondents have indicated that on average they still expect to consume less (by around 10 per cent) than they did before the COVID-19 pandemic started.