Ex-PM Muscat warns of 81% decline in demand for goods and services for pandemic's duration

Former Prime Minister Joseph Muscat has warned that demand for many goods and services will likely decline sharply by around 81%, as long as Malta continues to have COVID-19 infections.

In an 11-page report drawn up by Muscat, the second of his analyses on the impact of COVID-19 on the Maltese economy, he predicts that even after the relaxation of the most restrictive measures, most people will still stay away from travel, dining out and visit retail stores.

Muscat, who resigned last year in the wake of mass protests at the apparent involvement of his chief of staff in the murder of Daphne Caruana Galizia, was reported by the Times of Malta of having drafted the economic note based on findings of a telephone-based survey of a 600-strong sample of people, conducted by Labour Party pollster Vincent Marmara during the second week of May.

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The survey’s findings show that even after the lifting of the most restrictive measures, economic activity in Malta is expected to fall as the Maltese prefer to wait for a vaccine to become available.

But, even if a vaccine does become available to the public, spending is still expected to be lower compared to before the pandemic.

In the report, Muscat said that the findings stressed the importance of “devising correct economic incentives,” in particular the perceived safety of establishments, to strengthen confidence in consumers and increase spending.

The permanent effects on consumption forecast by the survey, together with a general tendency to avoid sending children to childcare facilities, might indicate that some households are considering dropping out of work the document says, warning of a shrinking labour force. 

The public would need clear guidelines and risk mitigation measures as well as financial incentives to be convinced that it is safe to go out, says the report.

The data showed that during this period when businesses start reopening, they are most likely to cut their consumption of services and limit activities that put them at the highest risk of contracting the virus.

These include holidays abroad, average frequency plummeting by 93%t, hotel breaks in Malta and Gozo, also falling by 90% and farmhouse breaks in Gozo down by 87%.

Other areas likely to be hit by a lack of confidence are public transport and restaurants, the use of which is expected to fall by more than 80% after the lifting of restrictions.

Retail activities, coffee shops and the use of ride hailing services are expected to be affected slightly less during this period.

Although those polled indicated that once a vaccine becomes available, they intended to increase their consumption significantly, despite the upturn in economic activity expected after the discovery of a vaccine, respondents indicated that they will still consume around 10% less than they did before the start of the pandemic.