The European Commission’s Autumn Economic Forecast 2020 has projected Malta’s economy will grow by 6.25 per cent in 2022. Based on this, the Government has issued a statement to praise the projection, noting it is the highest projected economic growth out of all EU countries, and that it is almost double the average growth levels projected for 2022 across the EU.
In the European Commission’s chapter on Malta, it said:
“The COVID-19 pandemic is having an acute impact on critical sectors of Malta’s economy including tourism and external trade, leading to a temporary and limited increase in the unemployment rate.
“A modest recovery is forecast in 2021 and 2022 but considerable uncertainty surrounds the evolution of the pandemic and the impact of the change to less beneficial trading relations between the UK and the EU. After a major crisis-induced plunge in 2020, the general government balance is set to gradually improve, while public debt is expected to peak at 60% of GDP in 2021.”
The EC noted that until recently, Malta has recorded one of the highest real GDP growth rates in the EU.
“The impact of the COVID-19 pandemic, however, has shaken the foundations of that growth model, which is strongly reliant on tourism and immigration.
“Malta’s GDP contracted significantly in the first half of 2020 as household consumption and construction activity fell sharply due to safety measures established by the authorities, and restricted air traffic interrupted international tourist arrivals to the island.
“While the pandemic is depressing economic activity in Malta, the Government’s stimulus package is expected to somewhat offset its toll on the economy.”
It noted the voucher system and wage supplements to affected employees should act to support consumption in the retail sector this year, “offsetting some of the hit inflicted during the lockdown”.
“Combined with these stimulus measures, high household savings have already shown the potential to unlock further consumption and residential property investment. In parallel, some large-scale investment projects are expected to maintain government expenditure.”
However, all GDP components apart from Government consumption are likely to collapse this year, particularly net exports, resulting in a GDP contraction around 7.25 per cent, the EC noted.
“A recovery driven by domestic demand is expected to accelerate from slow GDP growth of 3.0% in 2021 to some 6.25 per cent in 2022, reapproaching its 2019 level.
“Two factors weigh on the pace of the rebound in Malta: the evolution of the pandemic and the economic effects of the change to less beneficial EU-UK trading relations.”
The first will likely dictate how quickly the tourism sector may pull through the current crisis, while the latter has a considerable negative impact on the trade balance between the UK and Malta, the EC said.
“The new trade relations are expected to have the strongest impact on growth in 2021 and to a lesser extent also in 2022.
“Consequently, the current account surplus is projected to continue to subside in 2021 before rising again in 2022.
“Nonetheless, Malta’s economic outlook is closely tied to the economic performance of its main trading partners and their recovery. The uncertainty around the evolution of the pandemic may pose additional downside risks to Malta’s trade balance with the rest of the world, affecting its ability to bounce back from the crisis.”
Prime Minister Robert Abela shuts down rumours of impending lockdown
Prime Minister Robert Abela has shut down rumours that Malta is heading for lockdown imminently, rumours that had been making the rounds extensively on social media and messaging groups over the past week.
Taking questions from reporters after a press conference on Thursday morning, Dr Abela said he was not aware where the supposed list of measures being circulated originated from. The supposed measures highlight several strict COVID-19 prevention measures and amount to a national lockdown.
“I don’t know from where this came but I can confirm that we are not heading towards a total lockdown,” says Dr Abela in a Times of Malta report following this morning’s exchange with reporters.
Rumours have reached fever pitch after Malta announced the closure of bars for one month until 1st December, while concern was further raised following varying versions of lockdowns imposed in the UK, Germany, France, Italy, Czech Republic and other European nations.
Malta has itself faced a surge of COVID-19 infections, with triple digit daily increases becoming the norm from mid-October.
Asked about business concerns, Dr Abela reportedly said that while the Government was sensitive those establishments that have been suffering due to COVID measures currently in place, now was not the time to relax restrictive measures.
“Look at how Malta is operating, while globally we’re seeing a complete tragedy of countries having to call for total lockdowns. Yet, with certain restrictions, we’re managing to live a relatively normal life,” he is quoted as saying.
“This does not mean we are at liberty to relax…Right now, things are doing well but that situation could change quickly. Relaxing measures now could mean having to employ stricter ones in the future, and that is not something we want to do.”
In addition to closing bars, Malta introduced mandatory mask wearing in public from 26th October. Establishments with restaurant licences may continue to operate, while snack bars must close at 11pm and are not permitted to serve alcohol.