Some notes on economic risks

Two years in government and Robert Abela has nothing to show for his legacy except rampant rent-seeking (the latest case is the €31 million lease for government offices in Żejtun), the yacht-marina in Marsascala,  the car race-track in the prime industrial estate of Ħal Far, and a rule of law still in tatters. There is still no justice for Daphne and no public official or politician has yet been indicted on corruption – please note that Joseph Muscat is only being investigated because of a criminal complaint filed by NGO, Repubblika. Missing a legacy of his own, Abela needs to excessively pump his delusions with publicly-paid aids to his party media in order to convince people that he is the right man for the job.

Robert Abela’s legacy

Labour Party media is propagating the narrative that Robert Abela’s two years of government have been an astonishing record-breaking success for the economy. The reality is a bit different. Robert Abela’s delusional economic successes read like Chinese Communist Party economic data: bloated figures, misinterpretations and half-truths which over-all are false and outright disingenuous.

Robert Abela has had an easy ride throughout the pandemic thanks to the robust health service and a technocrat as his health minister who managed the pandemic successfully. The only time during the pandemic when we were on the brink of a crisis was when Robert Abela forced his way on the health authorities to re-open the country for cheap parties funded by MTA in Summer 2020. On the economic front, Robert Abela was supported by great fiscal leniency from the European Commission which eased its stance on budget deficits, while the European Central Bank helped government spending by increasing its bond reserves and lowering interest rates. Robert Abela is undoubtedly operating in a much better fiscal and monetary environment than the previous financial crisis of 2008.

Today, as inflation soars across the globe and supply chain problems persist, central banks are scrambling to address inflation gradually by closing the window of monetary excess. Robert Abela intends to keep a bloated government expenditure according to IMF economic forecasts. The government debt to GDP ratio increased from 53% in 2019 to 63% in 2021 and is set to remain at 65% by 2026. This forecast is being made in conjunction with another forecast that the GDP is set to increase, however, this economic bonanza is set to be partly paid by an ever-increasing government expenditure with government debt set to increase by as much as 50% from 2021 to 2026.

Malta has successfully grown its economy across the years by diversification and further innovation and by mainly creating new economic sectors whilst lessening our dependence on previous major economic sectors. The economic forecasts made on Malta’s GDP growth are being made on the premise that tourism will boom once the pandemic is over.  Currently, one of the major risks of the economy this year is that the tourism industry is beset with uncertainty whilst it is struggling to survive on government subsidies.  The Maltese government has so far spent around €653 million on wage subsidies alone, subsidizing more than 100,000 jobs. Currently, the tourism and hospitality sector is still on the government’s lifeline, which by 2020, amounted to around 47,800 employees in contrast to 54,400 employees in 2019. As of now, few are speaking of the prolonged risks of a crisis in the tourism industry which could result in a situation similar to the previous crisis when precarious employment became the norm. Clearly, we should by now begin to realise that we have an over-dependence on tourism, but we have done nothing so far to explore and create new economic sectors.

Another major risk we are facing is the silent ticking bomb of the home-ownership crisis. The percentage of homeowners seems to be decreasing as the registered number of homeowners stood at 78.6% in 2020 contrasted with that of 81.9% in 2017. Now, the home-ownership rate should not be considered as a good indicator of the health of the economy, as even Greece has a relatively high home-ownership rate at 74.6%. One should also point out that the population growth in Malta between 2013 and 2020 has grown at an average rate of 2.8% per year.
Robert Abela should also learn to read all of the NSO reports instead of nitpicking for propaganda purposes. The ever increasing problem of high-priced housing is glaring. From the NSO’s report: 

Housing costs were perceived to constitute a slight burden for 56.5 per cent of all persons living
in households. A further 24.4 per cent considered these costs to be a heavy burden while, for the remaining 19.1 per cent, they were of no burden at all (Table 6 and Chart 2). Furthermore, 78.6 per cent of persons who were severely materially deprived consider the housing cost to be a heavy burden. In contrast, only 39.3 per cent of people at-risk-of-poverty considered the housing cost to be a heavy burden (Table 7).

Quantifying the risk of the home-ownership crisis is not sexy for electoral purposes so, such a model would have to be created. Surely, something is not adding up in Labour’s propaganda, however, when one considers that home prices in Malta have increased by more than 100% from 2013 to 2019 while wages increased by only around 20%. Meanwhile, while inflation is soaring during the pandemic, home prices don’t seem to have abated very much. Robert Abela’s solution, is to call the Archbishop to fill up his empty convents.

On a positive note, Grey Listing doesn’t seem to have had its intended effect, as of now, as the domiciled funds and foreign wealth stored in Malta seems to be increasing, although this statistic should not be confused with Labour’s propaganda cry that foreign investment in Malta is actually increasing. Money coming in as funds and stored wealth is not actually a direct investment, but we count it as so in our statistics.

The risks facing the Maltese economy seem to be lack of diversification, lack of innovation, a home-ownership crisis, and an ever-increasing public debt burden with a bloated government. You’re not a technocrat if you simply put on the public payroll employees at Air Malta who have been employed out of nepotism and political favour by Konrad Mizzi and Silvio Schembri. You’re just another politician.




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