|
Kurt Sansone
The autumn economic forecast prepared by the Eureopan Commission has revised downwards government’s growth projections for this year and the next to a miserable 0.8 and 0.7 per cent respectively, putting Malta as the worst performing member state in the next two years.
The Commission’s bleak forecast puts into question Lawrence Gonzi’s budget speech assertion that government is expected to raise more revenue from taxes purely because of increased economic activity. It also makes it highly unlikely that the incumbent premier will be basing his electoral campaign on economic revival.
The report published on Thursday is a jolt for the Prime Minister who has tried to boost waning confidence by being upbeat about economic recovery. Barely three weeks after Lawrence Gonzi announced in the budget that GDP growth for this year was expected to be 1.7 per cent, the Commission’s report has revised the figure downwards to 0.8 per cent.
Even government’s forecast of 1.1 per cent growth for next year has been revised downwards to 0.7 per cent. It is only in 2007 that Malta will experience a growth of 1.1 per cent according to the Commission report, a figure which will leave the country languishing behind all the other member states.
Government’s own pre-budget document, which was supposed to lay out a roadmap for the next five years, was projecting modest growth rates of 2.1 per cent for 2006 and 2007. With the Commission forecasting a growth of 0.8 per cent for 2005, Malta is way behind the new member states and only surpasses the Netherlands, Portugal and Italy.
These three countries are however expected to rebound in the next two years pushing Malta to the bottom rung.
In contrast, Cyprus, the other Mediterranean island economy that is dependent on tourism, is expected to register 3.9 per cent growth this year, four per cent in 2006 and 4.2 per cent in 2007.
But the Commission report also makes it clear that the little growth Malta is experiencing is not a direct result of increased private sector activity as the Prime Minister suggested in the budget speech. Growth is being pushed up by publicly-funded capital projects.
The Commission forecast report for Malta states: “The buoyant performance of investment in the midst of stagnation in the rest of the Maltese economy is due to the implementation of infrastructure projects financed by EU structural funds and public works funded through the Italian Protocol, which consists of grants from the Italian government for major infrastructure projects.”
The new hospital, government’s single largest capital expenditure component, also gets a mention since the increase in investment is unrelated to other sectors of the economy.
“As in previous years, the high level of public investment reflects the building of the Mater Dei Hospital, which is now in its final stages. This specific growth composition, which is particularly based on civil construction works, largely explains why high investment growth is unrelated to any other demand component,” the report says.
ksansone@mediatoday.com.mt
|
