Short-term expansion of construction risky for economic stability – Kristy Debono

Economist and Nationalist MP Kristy Debono has warned the government that seeking short-term and rapid economic growth and job-creation through rapid expansion of the construction and property industries could undermine the stability of Malta's economy.

Debono was speaking in Parliament on Tuesday evening during debate on the Budgetary Measures Implementation Bill , following the establishment of the Economic and Foreign Affairs parliamentary committee upon which she will be sitting.

Noting the need for reforms in MEPA that will allow a significant boost in the development sector, such as the revision of MEPA tariffs which have been criticised as stifling developers, she however warned that the government should not give the impression that MEPA would be handing out "blank cheques" to the construction industry. 

She drew upon the beleaguered Spanish economy model as an example, pointing out that much of Spain's banking assets before the country's financial downturn were based upon the property market.

She said that rapid expansion in the development industry outpaced the demand for property, which led to delays in construction projects and a slowing down of property sales. "When this bubble burst, the consequences were disastrous," she said.

"Unemployment exceeded 10% in just a few months, and later hit 25%. The main contributors were the construction and property sectors."

Debono however played down her warning by saying that she was not trying to raise alarms, but simply trying to underline the lesson that Malta should learn from Spain.

"It is true that the construction industry and the property sector underwent a quiet period during the past months, and it is something that surely did not help the previous administration's popularity," Debono said, referring to concerns raised by various industry stakeholders regarding stagnation in these sectors.

"But the last thing this new government should try to do is appease everyone on an immediate, short-term basis," she warned, saying that government should be wary from accommodating the construction and development sector simply to create jobs and generate economic growth on a short-term basis.

Debono urged the government to be more measured in its approach. Conceding that achieving a perfect balance between demand and supply is "impossible", she however urged the government to consider the whole picture.

"If we do not try to achieve the best balance possible, we risk unbalancing the economy."

Debono maintained that "disciplined growth from the property and development sector should be encouraged" but insisted that "artificial and short-term expansion that could undermine the stability of the economy should be avoided."

She urged government to approach these sectors cautiously and backed up by studies into the best way to regulate this economic growth.

In her own address, fellow newcomer to the Opposition benches Nationalist MP said that while the Labour Party had previously been only too forthcoming with criticism, it was however proving itself not as vociferous with regard to the solutions it was now proposing from the government benches.

She argued that the PL's "gloom and doom approach that gave the impression that Malta was bankrupt, with people starving and begging in the streets" was simply intended to downplay government's achievements, and that despite how the government was in its sixth week, it has not tabled concrete plans to fix this situation.