As Finance Minister Edward Scicluna looks back on 2019, he is pleased that – as such – the year hasn’t served up too many economic surprises. “That’s what we were after,” he tells me. “When we look at what we set out to do in the 2019 Budget, we are practically on track. Of course, you never quite know what the year could bring in the first two or three quarters but, now that we are reaching the end of the year, we can say with certainty that it has been a good year.”
Minister Scicluna assesses this success based on the number of measures and proposals – announced in the 2019 Budget – that have been completed. “We’re at 74 per cent at the moment,” he continues, “which is quite satisfactory. We knew that some measures would take more than 12 calendar months to complete, and they are still on track. But we have delivered.”
He explains that, in the first six months of the year, the local economy grew by 4.7 per cent – more than three times higher than the EU’s average growth rate of 1.4 per cent. “Investment was the primary driver that fuelled that growth, as it increased by 14.2 per cent,” he continues.
“Private consumption also contributed to economic growth, with a 4.5 per cent increase. This strong increase in investment led imports to rise by 2.2 per cent, while exports increased by 1.5 per cent. All this was reflected in substantial increases of 5.7 per cent in wages and salaries, and 9.5 per cent in company profits.”
Malta’s economy also continued to be diversified in the first half of the year. As the Minister explains, all sectors – from the industrial to the service divisions – registered increases in Gross Value Added, and this grew by 7.5 per cent overall.
“The labour market in Malta continued to be dynamic throughout the year, too,” he continues, “with the number of employed people now reaching 230,000. The private sector continued to fuel the increase in employment and was responsible for more than 90 per cent of the new jobs created.”
Minister Scicluna goes on to talk about the successes that were registered in 2019 in relation to the international trade sector, where the country’s external account registered a surplus of 8 per cent of the GDP in the first half of the year. “
All this led to a situation where we succeeded in attaining sustainability in public finances with public debt decreasing to 45.8 per cent at the end of 2018 and expecting it to decrease to 43.1 per cent at the end of 2019. Once again, we also expect to register a surplus in our fiscal balance and must highlight the fact that, by 2020, Malta’s GDP will have doubled in nominal terms since 2013, from €7 billion to €14 billion. That is a span of just eight years.”
Switching his attention from the past to the future, Minister Scicluna notes, however, that challenges could be afoot. “We must bear in mind that the International Monetary Fund is revising its global economic growth projections for next year downward, to 3.5 per cent. This is because of the slower rate of growth in investment and in consumption of durable goods in advanced and emerging countries, as well as uncertainties in international trade due to the introduction of new tariffs, and – of course – Brexit.”
Nevertheless, he says that Malta is still forecasting an economic growth rate of 4.3 per cent in real terms, and 6.5 per cent in nominal terms – above the expected Eurozone average of 1.6 per cent and 1.4 per cent respectively. “This growth is expected to be fuelled by a 9.7 per cent increase in investment, while private consumption is expected to increase by 4 per cent, and public consumption by 4.9 per cent.
“Overall, this growth forecast means that we are expecting to have a 4.1 per cent surplus, and that the burden of debt will decrease further to 40.4 per cent of the GDP in 2020.”
As far as industry is concerned, the Minister talks through a number of new initiatives that will continue the diversification of Malta’s economy, and which he says will be important for its sustainability in the future. “Initiatives are launching in everything from blockchain to medical cannabis, AI and IoT,” he explains. “We have shown a lot of interest in all of them, and we’re taking the initiative to be as far ahead as we can. In the past we have shown – through iGaming and other areas – that being a small country gives us the flexibility to react and make things happen. I liken it to the Kodak of yesterday and Instagram of today; there is always a fresh way of doing things.”
Minister Scicluna believes it is Malta’s willingness to listen to forward-thinking industries that make it special and appealing. “Yes, certain sectors could be risky, but we have to manage that risk. Having a piece of the pie will give us some insurance for the future, and will help make us future-proof.”
Admittedly, the Minister does believe that the environment and waste management will prove to be major challenges in the years to come, but he stresses that careful planning will help to manage that. “I think there are encouraging signs. Take the separation of waste; a lot of families are now cooperating and feel they are doing something to help our future. They are aware that what you put in your dustbin counts. With this in mind, our waste to energy plant will be crucial in the future, along with our bottle-collecting plan. We look forward to the private sector coming on board with this as well.”
This is an extract of an interview which appeared in the Economic Vision 2020.