Download National Economic Recovery Measures in Malta

MALTA
National Economic Recovery Measures in Malta
Given its size, Malta’s economy operates in the framework of high dependence on imports, in order to
respond to its expenditure needs, as well as on its exports, so as to generate the income. This position
demands carefully tailored stimuli measures for the whole economy, which was projected to increase
by 0.7% in this year.
The Maltese Government has formulated its first policy responses to the recent global economic
downturn and consequent decline in demand, in the 2009 fiscal budget, with a mix of expenditure
programmes and tax alleviation policies.
Malta’s most resilient industries to external volatilities: the pharmaceutical industry, IT and financial
services, represent only around 17% of its total economic activity. Of particular note is that Malta’s
financial system has remained relatively immune to the negative impacts from abroad, thanks to the
strong regulatory frameworks and predominant reliance on its domestic savings deposits.
However, the major part of the economy (63%) relies on manufacturing and tourism industries, which
are particularly vulnerable to the recent decline in global demand. In the past, Malta’s business cycles
coincided broadly with the EU15 ones, albeit with a three times more pronounced counter-effects.
In view of this past experience, Malta’s Government is bracing itself up with higher expenditure
projects on infrastructure, environment, investments in education and re-skilling, industry and tourism
marketing. Along with these projects, the main policy orientation remains: improving business
regulation initiatives mainly in respect of small and medium sized enterprises, as well as fostering
flexicurity at all levels. Therefore, the following considerations are of paramount significance to
render this policy orientation effective:
a) the intended stimulus measures need to bring an immediate positive effect if the magnitude of
extraordinary challenges expected in a short run are to be managed successfully;
b) in Malta, being a small economy, the traditional approach of increase in consumers’ disposable
incomes is not likely to stimulate domestic economic activity in any marked way rather, this
approach would result in higher imports or possibly in increased savings;
c) the most effective way of safeguarding the domestic activity and employment is by focusing
stimuli measures directly towards productive activities, and in particular those where Malta
already possesses a competitive advantage;
d) the need to safeguard existing activities over the coming months should not compromise Malta’s
ongoing economic restructuring, albeit the latter may to an extent be dented by the imminent
difficult international scenario.
Malta taps extensively from the EU funds, ERDF and ESF in particular, which is also seen as a
positive contribution towards the national targeted policy aims.
A continuous collaboration between the Government and the Social Partners has been beneficial to
alleviate more drastic consequences of the slow-down, hence present job losses are seen as being well
within the absorption capacity of the national economy. The dialogue between the Social Partners and
the Government focuses primarily on the following issues:
a.
b.
c.
d.
e.
f.
g.
a reduction in the operational costs of business in Malta;
safeguarding major productive establishments from losing valuable human capital;
increased marketing support to sustain demand in the tourism sector;
improving flexibility in working arrangements;
enhancing access by business to low cost liquidity;
further simplification and speeding up of processes to access EU funds;
redoubling of efforts to attract investment in areas where Malta already enjoys a competitive
advantage;
h. the expediting of planning permitting procedures for major projects that are already in the
pipeline;
i. Encouraging and where necessary prodding Government to seek temporary derogations from
the limits to state aid to enterprises.
Both parties agree that in order to achieve the ultimate goal of bringing Malta’s GDP per capita levels
closer to the EU average, monitoring and anticipation of difficulties needs to be exercised with
highest agility.