Economic certainty in uncertain times

Amidst the bustle of an intense electoral campaign, one could be forgiven for thinking that everything in this country is on hold with all eyes firmly on what each political party is proposing. And yet, as an economist, four separate yet intrinsically related news articles grabbed my attention. At the face of it, they are four rather unremarkable articles, exactly the type of stories that us economists love to read, living up to our stereotype as dismal scientists. Nonetheless, these news stories are extremely important, not because of their sensationalism, but rather because they provide unequivocal, objective confirmation of where this country is, what we have collectively achieved over the last few years, and where we’re going.

The first two stories relate to two separate, independent assessments undertaken by reputable international credit rating agencies, namely Moody’s and Scope Ratings. In both cases, the verdict is clear: Malta’s economy remains strong, dynamic and stable, outperforming its European counterparts and underpinned by robust private consumption, competitive exports and sound public finances. And why are these three elements so remarkable? They each represent an essential facet of the Maltese economy that cannot be taken for granted.

Firstly, buoyant private consumption reflects both the level of disposable income available to individuals and families, as well as their confidence in the economy’s overall performance and its ability to continue to sustain job creation and wage increases. Secondly, competitive exports in diverse sectors like tourism, financial services and microelectronics show that despite rising global competition, Malta is able to hold its own. Thirdly, sound public finances are the bedrock of the country’s economic sustainability and credibility, enabling us to weather the inevitable storms that come our way; a particularly impressive feat considering the government’s continued subsidisation of fuel and energy bills for Maltese families and businesses, and unprecedented tax cuts over the last few years.

The best part, however, does not lie merely in the here and now; both assessments expect these economic conditions to remain stable and persist over the coming years, despite the avalanche of global economic uncertainties that continue to dominate proceedings. Considering that several other EU member states were provided with a negative outlook by the same ratings agencies, our results assume even greater importance. These are not electoral slogans or posturing; these are credible third-party international assessments providing us with perhaps the ultimate rubber-stamp to certify that our economy is thriving and will continue to do so due to the sustainability and resilience of our economic infrastructure. Such stability and growth does happen by accident; it is a direct consequence of both intelligent economic governance and the ingenuity of our workforce and business community.

Now, you may be thinking that while it is always nice to be told that the economy is doing well by external sources, what about the feeling on the ground amongst Maltese families? A perfectly understandable question, because in truth it is essential that there is alignment between what the impressive macroeconomic figures are telling us, and what people are feeling and experiencing on a daily basis, since this ultimately will have a real impact on quality of life.

And this is where the third news story comes into play, since it reports the results obtained from the most recent Eurobarometer survey that gauges people’s views on a wide variety of relevant social, political and economic topics. The verdict is resounding: 75% of Maltese people believe that the economy is performing well, while almost 90% believe that their household’s financial situation is good. These results are extremely impressive, particularly since respondents are not known to pull any punches during these kinds of surveys—for context, across the EU only 38% believe that their national economy is doing well. Crucially, they point towards a Maltese population that is recognising the country’s economic success and, more importantly, feeling the fruits of this success directly in terms of increased household income.

The final, and most recent, news story perfectly sums up the gist of all three preceding reports. The much-awaited Spring Economic Forecast just published by the European Commission. It shows strong economic growth, which is expected to persist in the coming years, built on strong performance across sectors like gaming, professional services, finance and ICT, with robust public finances, low unemployment and continued growth in real wages for workers and their families. All this will happen despite growing international economic uncertainties and a general slowdown in growth across the EU. Malta’s projected economic growth this year is expected to be the highest among member states yet again.

It is easy to take such impressive results for granted. Since 2013 our economy has trebled in size, despite COVID-19’s best efforts. To put that into perspective, previously it had taken Malta’s economy over 25 years to treble in size—from 1988 to 2013. But this is precisely why we cannot ignore or downplay the impeccable work done by government to support businesses and workers, nurture new economic niches and strengthen the country’s resilience.

Are we perfect? Certainly not, and we cannot rest on our laurels. We must continue to focus on economic policy that raises output via productivity improvements, in tandem with the necessary investments in our physical, digital and environmental infrastructure. This must be underpinned by a modern educational system that cultivates skills and talent. We must ensure that our economy not only grows but enriches the personal wellbeing of every single inhabitant.

The take home message is simple: Despite global economic uncertainties and a hotly-contested general election, the Maltese economy is still firing on all cylinders, providing stability, prosperity and peace of mind to households and businesses in a manner that is sustainable, resilient and most importantly tangible.