The world, including Malta, is facing challenging times. After so many years of growth, the wheels of our economy are very unexpectedly grinding to a halt. The actions we take in the coming weeks to mitigate the economic consequences of COVID-19 will shape the future of the Maltese economy, possibly for years to come.
This grave situation creates a real sense of responsibility for stakeholders to make the right decisions, in order for our nation to come out of this as unscathed as possible.
From an economic perspective, our situation is one that is not difficult to understand. Malta has a workforce of 240,000 people working across different industries, including the State, manufacturing, tourism and entertainment, gaming, real estate, financial services and related industries. Unemployment is practically non-existent. A number of these sectors rely on incoming investment and people, both of which have almost stopped.
This has left self-employed individuals, employers and local businesses with at times, a 100 per cent drop in revenue. Needless to say, a business cannot finance its expenses and debt, beyond the short-term, without any revenue.
There are three main stakeholders which need to play their part in steering the economy: businesses, employees and the Government.
In the short-term, companies are trying to implement remote working, which for some can be challenging, especially in industries heavy on social contact. Nevertheless, it is clear that the majority of employers are looking to safeguard the well-being of their employees.
It is an impossibility that businesses and employers take on this challenge alone
Employees on their part need to understand that employers can only help up to a certain point and that they, the employees, may also be required to make – hopefully minimal – an element of financial sacrifice.
The third stakeholder, being the Government, needs to play an important role in protecting the economy and safeguarding jobs. The fiscal package presented last week, falls very short of providing the necessary support, especially for employees working in high-value industries.
The Government’s response needs to be fast and effective. Across the globe we have seen the slashing of interest rates and other effective fiscal measures being implemented.
The Maltese Government should support both businesses and households by introducing and improving upon a number of measures as follows: expedited VAT and income tax refund payments to companies to help with cash flow; drastically raising the percentage of wage covered by Government for employees across all effected industries, together with increasing any capping – a waiver of all payroll tax may also be an option; income tax reduction for landlords which should be passed on to tenants; debt guarantees with reduced rates of interest – this needs to be done cautiously not to leave companies over-leveraged; financial aid for single parents who now cannot work due to closed schools; cash grants to support the more vulnerable; and assistance to all self-employed persons across all industries.
It is an impossibility that businesses and employers take on this economic challenge alone. We have to attack it together, all with the same level of commitment and sacrifice. If part of us falls short, we will all fail.
The Government needs to listen to stakeholders and reconsider its proposals to ensure the support package safeguards jobs across the industry spectrum. It needs to do this now.
Michael Mercieca, accountant and co-founder of Quicklets, Zanzi Homes and MS Mercieca Holdings.