Updated 11.10am, adds MHRA statement

Malta stands to lose out on an estimated €3 billion in tourist expenditure due to the COVID-19 outbreak, which would send shockwaves through the entire economy, government advisers have warned. 

An optimistic forecast predicts that the islands will not see tourist arrivals beginning to recover until December. But some of the advisers in the government’s novel coronavirus emergency think-tank believe the wait could be substantially longer, with the tourism drought lasting until summer of 2021.   

“Tourism accounts for nearly a quarter of our economy and expenditure is €3 billion annually. Is it lost forever? No. But it will be lost for an uncertain length of time and we have to start thinking about how this will change the economy and how we will have to react to this change,” one adviser involved in consultations with the government said.  

Last week, Times of Malta reported how experts had warned the government that the country’s economic growth could shrink by up to half over the next year, as the global spread of the virus brings commerce to a grinding halt. 

A major source of this local shrinkage will be the sudden halt of hoards of tourist arrivals that sustain thousands of businesses on the islands.  

“It’s a question of timing. Time is the fire in which we burn – if this period is sharp and short, we will emerge quite well,” he said.

“If not, then we have to start discussing a situation where our economy is quite different, where we are not reliant on tourists and depend a lot on the Maltese buyer,” he said.

The economists advising the government believe that the domestic economy will “wake up”  quicker than airports will open. Pent-up local demand could kickstart consumption, they predict.

“After months of being stuck indoors, sections of the Maltese will certainly be eager to spend again, to go out to restaurants and so on. This will be the spark that gets the economy back to life,” the source said.

However, irrespective of efforts to capitalise on domestic demand for goods and services, the large hit in consumption will still have a knock-on effect on the economy.

One such example is manufacturing, which economic advisers say is among the most susceptible to dips in GDP.

To address this, the government may have to release funds in targeted aid measures to help sectors such as this to weather the transition period.  

“The key to all will be the government staying in touch with the economy and with local businesses. We have never been through anything like this... past crises don’t compare so there is no guide for this,” the adviser said. 

Impact on unemployment figures

Economists advising the government are split on the impact COVID-19 will have on unemployment, with worst-case scenarios estimating up to one in five in the private sector workers could be out of a job.  

Times of Malta is informed that one economist advising the government has warned that as many as 50,000 people could be registering for unemployment benefits within the next year.  

However, other advisers believe this figure is “inflated” and does not take into account the impact the aid measures planned for the coming weeks and months, will have.  

“While there are projections, based on past data, that put our medium- to long-term unemployment at around 40,000 to 50,000, these are doomsday figures and do not take into account various factors,” one member of the government’s COVID-19 economic advisory group said.  

The more conservative figure for unemployment, he added, was below 20,000. And while this was still a substantial number, it would have to be seen in the wider context of social and economic measures that will be rolled out.

Tourism will remain a winner - MHRA

In a reaction on Thursday, the Malta Hotels and Restaurants Association said tourism in Malta last year accounted for €2.1 billion out of a GDP of €12 million.

The tourism sector in the first months of the year marked record performance levels and as soon as travel restrictions would start to be relaxed, the association was confident that the sector would gradually pick up before the end of this year, he said. 

Times of Malta’s economist source explained that while the direct expenditure alone for tourists in 2019, stood at €2.2billion, the multiplier effect that this expenditure had on the economy was calculated at roughly 50 per cent. 

“The way this is calculated is the expenditure of tourists on the island, in hotels and so on, and what is known as the direct multipliers, such as the purchases made by hotels and restaurants and so on as a result of tourists. So the figure at risk actually stands at €3billion,” he said.

Malta's Hotels and Restaurants Association also said that it was working closely with the social partners and the government to safeguard 50,000 jobs and more. 

“Undoubtedly, weeks of uncertainty lie ahead of us and no one can really foretell the future - that’s why claims made that there can be a loss of 50,000 jobs may sound too sensational and cause unnecessary and unfounded alarms during such sensitive times,” president Tony Zahra said.

Mr Zahra said measures of support to the tourism aimed to maintain work processes and systems in place as much as possible, ensuring job security and consequently enough capacity to relaunch operations at the right moment. 

“Now it’s not the time to travel the world. But one thing is for sure: people's desire to travel and dine out will always be strong. As soon as the crisis situation returns to normal, Malta needs to be ready - and this is what the agreed measures aim to achieve. Then we can do what we do best: host guests and offer our customers a unique tourism experience.”