Fall in trade gap statistics show economy has ‘not yet’ come out of recession
The fall in the visible trade gap during November 2009 by €20.1 million to €66.0 million during the same month as reported by the National Statistics’ Office (NSO) on 7 January 2010 was a sign that the country had not come yet of the recession.
Economic analyst John Cassar White told Business Today: “To interpret this fall in the trade gap one needs to understand what caused it.
“The fall in the importation of industrial related goods does not augur well for the quick recovery that we need,” Cassar-White warned.
It was also evident, he added, “that consumption is falling with more people feeling the pinch of the current economic slowdown.”
Likewise, the latest NSO statistics for international trade for the first eleven months of 2009 have shown that the visible trade gap during that period fell by €208.3 million when compared to the same period last year, to stand at €1,061.7 million at the end of November 2009.
Asked by Business Today for his reaction to these figures, Cassar-White explained that in a recession, “it is normal for both exports and exports to take a knock.
“It is obvious that fear about the future is affecting consumer demand with the knock on effect on imports,” Cassar-White told Business Today.
“It seems that businesses too are still hesitant on future investment and are waiting too see how things turn out. It is also evident that demand for our goods and services from abroad is still weak. This is keeping our exports down,” the economic analyst told Business Today.
Finally, asked his projection for foreign trade flows for this year with Malta still not out of the economic recession, Cassar-White explained that with an open economy like ours that was so heavily dependant on exports, “we will only know when the end of the recession is near when we se other countries recovering.
“The worrying element is that even the slight signs of recovery in the US and Europe are not indicating an increase in employment. Quite the contrary jobs are still being lost,” the economic analyst told Business Today.
So it would take “longer than usual” to see local demand grow again after the current recession.
“I still think that our recovery will start in 2011. And this is dependant on our continuing with reforms in our economy to make us competitive again in sectors like tourism,” Cassar-White concluded.
On his part, senior economist and Labour MEP Edward Scicluna told Business Today that the news release by the NSO that the visible trade gap had “improved” in November “was splashed across the media as it should. Of course the readers must have taken a sigh of relief.
“For a country which imports and exports both goods and services what matters however is the external current account which unfortunately is very much in the red,” Scicluna insisted.
“For the trade statistics, what an economist is after during a recession is whether exports are picking up and forget the trade gap,” he told Business Today. “Exports mean business and business mean jobs,” Scicluna added.
Finally, asked his projection Scicluna explained how looking at the rate of fall of both imports and exports over the last three months, the nominal trend indicated that there is a slight improvement only in November with October still experiencing a deterioration.
“So one must show very cautious optimism that the flows of exports and imports are indeed picking up. “However my hunch is that we are very very slowly getting out of the worst part of the recession. At this rate however expect the job situation to get worse not better for the medium term future,” Scicluna warned.