Optimism and confidence that the COVID-19 outbreak will not threaten many people’s jobs should be taken with a degree of caution as the scenario could worsen if the crisis persists.

The warning was sounded by two economists who were asked to give their reaction to the findings of a survey commissioned by Times of Malta, which took a snapshot of the current mood of the country nearly a month after the first confirmed case.

From the study carried out by EMCS Ltd, it transpired that there is still considerable confidence in terms of job security with ‘only’ 22% expressing concern.

In his evaluation, economist Philip Von Brockdorff pointed out that the survey results could be “somewhat clouded” by the positive reaction to government’s financial aid package.

“This sentiment could be somewhat misplaced in respondents not fully realising the far-reaching consequences of a prolonged crisis,” he said.

While the exact nature of the repercussions could not be predicted at this stage, indications that a vaccine would not be available for at least 12 months painted a very gloomy scenario, he said.

“Are governments willing to wait that long to lift restrictions? I’m not sure they are,” the economist said.

Economist Lino Briguglio said the 22% figure which emerged from the survey was probably a good forecast within the existing circumstances. However, he echoed concerns expressed elsewhere that the situation could change depending on the duration of the outbreak.

Different perspectives according to age

In his analysis, Von Brockdorff said the survey results could indicate two things.

Young respondents might not be fully cognisant of the economic consequences of a prolonged period of restrictions and economic freezing of economic activities and the effect on jobs and economic growth, both in the short and medium-term.

Another possible explanation is that respondents may be reacting to the positive assessment given by social partners and economists to the financial aid package.

“The financial aid package is intended to avoid massive job losses and seems to be having positive results already. However, the latest financial package has a start and end date (around June 9) and is costing a relatively huge amount of money in terms of wage subsidies, deferred tax payments and loan guarantees,” he said.

What happens if crisis persists?

A prolonged outbreak or a second wave of infections would require additional government aid.

Since this is a global crisis, much would depend on the efforts of other countries

Von Brockdorff said this support would be dependent on the government’s capacity to borrow further, over and above the huge amounts being already raised from loans.

Moreover, since this is a global crisis, much would depend on the efforts of other countries.

Meanwhile, come next month, governments might start to be pressured to lift restrictions sooner rather than later.

“Can we reopen our economy in May or June? The longer the crisis, the longer it will take for the economy to recover and generate enough activity for new employment opportunities,” Von Brockdorff added.

Despite the government’s best efforts, some job losses in April and May are unavoidable, he warned.

Tourism is worst-hit sector

Briguglio identified the tourism industry as the one which will carry the biggest burden, saying it accounted to about 12% of Malta’s economy.

“Some workers in this industry are likely to lose their job. However, many workers in tourism are part-timers and therefore may not end up as fully unemployed as they might weather the storm in case they are able to retain their primary job,” he said.

Tourism contributes another 12% to the economy in the form of demand from the related services in the supply chain (e.g. agriculture, laundries). These sectors will also feel the pinch, but in view of the fact they are not entirely dependent on tourism, not all jobs in these ancillary industries will be lost.

Stefano Mallia, partner at EMCS Ltd, said the survey figures show there is still considerable confidence that the COVID-19 crisis will not impact job security.

“This to me was perhaps the most surprising finding of this survey,” he said.

“This can either mean that there is still a general lack of knowledge of how serious the situation can become or else there is a high confidence that the government is in a strong enough position to steer the economy through this storm.”