Robert Abela is quick to declare victory laps but it is important to give some context to the 3.9% growth rate registered in Q2 before assuming that things are all fine. Apart from the seasonality aspect of the figure, the statistics also showed slowing local consumption, paired with European recessionary vibes. The growth rate is substantial for the first time since 2020 and it is buoyed by heavy fiscal stimulus and aided by the seasonality in the tourism sector. Fiscal stimulus is set to go down as the government will be forced to move to a 3% deficit and lower.
Many Maltese companies such as Farsons, Bank of Valletta, and GO are doing well and so are foreign companies such as St Microelectronics, although industrial production has been lagging. Both the online gaming and the financial services industries (according to the NSO statistics) seem to remain growing, however, FDI figures may be at risk of slowing. Inflation in Malta is still going strong and salary statistics show that salaries are on the rise, but not for all of the workforce which still has around 55,000 workers and more getting paid below the average salary.
Malta still has robust industries that can produce a lot of value, but more private investment will be needed to offset reductions in fiscal stimulus.
Inevitably, if we are to control fiscal spending we are to address the government’s mismanagement of the energy sector and the energy purchases which are keeping energy subsidies high (more than €200 million this year alone). The government is still heavily in the red on its gas purchases due to its bad trade pinning its gas purchases at oil price changes. Since this deal was struck oil prices have declined by 20% while gas prices have declined by 63%. Miriam Dalli, the Minister for Energy has so far avoided replying to my questions about her trade, although earlier this year she predicted gas prices would rise again – she was wrong.