Statistics issued yesterday by the National Statistics Office, Eurostat and the Central Bank confirm that the Maltese economy is in clear recession, as the first quarter of 2009 registered a ‘real term’ shrinking of 3.3 per cent in Gross Domestic Product.
Although expected, the figures released yesterday sound the alarm bells for government, as dwindling tourism arrivals and a practical halt in orders from the manufacturing sector, spell trouble for the employment sector, inflation and consumer confidence.
According to the NSO, during the first quarter of 2009 GDP amounted to €1,315.2 million, signalling a decline of 1.0 per cent compared to the same period last year. In real terms, GDP contracted by 3.3 per cent.
In a Quarterly Review published also by the Central Bank, it was explained that lower tourist arrivals together with a downturn in global demand due to the international financial crisis, were the cause of the decline in Malta’s economic activity during the period under review, reflecting the impact from the global economic downturn.
In terms of perceptions – surveys show that business sentiment and consumer confidence weakened further in the final quarter of 2008 and the first quarter of 2009, while signs of a deteriorating economic environment also showed up in the labour market.
However, even if the employment sector continued to expand during 2008, it has since been on what has been defined as “on an upward trend.”
The fact that inflation in Malta remains above the Euro area is – according to the Central Bank – a “source of concern,” and suggested that this could be addressed, in part, “by promoting more competitive product markets and increased labour market flexibility. “Progress in these areas would allow the Maltese economy to benefit more from an eventual recovery,” it said.
In the case of fiscal policy, the Central Bank argues that there is little room for manoeuvre, adding that it remains important to “simultaneously resume the fiscal consolidation process, especially given the growing impact that population ageing is likely to have on public finances,” hinting at the urgency to reform the pensions sector.
Back to the NSO statistics, it was explained that drops in value added were registered in electricity, gas and water supply; hotels and restaurants; fishing and the overall manufacturing sector. The same situation was registered also in wholesale and retail trade; financial intermediation; transport, storage and communication; construction; and public administration.
However growth in value added was registered in remote gaming activities; health; education; agriculture; real estate, renting and business activities.
On expenditure, the NSO said that at constant prices, GDP declined by 3.3 per cent. Total final consumption expenditure in real terms declined by 0.8 per cent. Gross fixed capital formation at constant prices declined. Real exports and real imports also experienced drops.
A decline in GDP at current prices, amounting to €13.7 million, was estimated to have been caused by a €25.8 million rise in compensation of employees, a €45.3 million fall in gross operating surplus of enterprises, and a €5.7 million rise in net taxation on production and imports.