The financial and economic situation of Malta
A Brief Overview

The Central Office of Statistics publishes regular statistics about the current state of the Maltese economy. Such statistics will be quoted in the Budget speech and explained in further detail in the Economic Survey which is published together with the Budget speech. Here is a short summary of the current state of the Maltese Economy:

Government Finances: When compared to the first 9 months of 1998, this year government ordinary revenue had gone up by 12.7%. This was due to an increase in revenue from such sources as the Value Added Tax (VAT), income tax, duty and excise, fines and social security contributions . Social security contributions were expected to increase as a result of the rate being increased by 1% in this year's budget. The increase in revenue from Income Tax is indicative of the fact that better measures are being taken to collect such a tax more efficiently and effectively. Earnings from VAT reflect the expenditure of consumers, if actual revenue is more than the predicted amount then the consumption level was higher than that predicted by the Minister.

Malta’s financial deficit should be around 4% of the Gross Domestic Product (GDP), when one takes into consideration the revenue generated from the sale of the government's majority shareholding in Mid-Med Bank to international banking group HSBC. Provisional figures supplied by the Central Office of Statistics reveal that Government Debt outstanding at the end of last September amounted to Lm811.2 million (US$2,027 million), up from Lm726.3 million (US$1,815 million) outstanding at the end of September last year.

The Balance of Payments: When compared to last year this has also improved, confirming a positive trend for the last few years. If broken up into the different sectors one can see that the balance on the current account improved by Lm34 million (US$ 85 million) to record a surplus of Lm18.3 million (US$ 36.6 million) over the first nine months of last year. Yet the balance of trade worsened by Lm3 million (US$ 7.5 million). However increases in the investment income account and travel accounts (which includes earnings from tourism) made good for this decrease. Once again one should bear in mind the fact that the inflow of funds coming in relating to the purchase of the Mid Med Bank by HSBC has also improved the external financial position.

Tourism: In these past three years the number of tourists arriving in Malta has increased. However earnings from tourism did not increase at the same rate. Despite this increase in arrivals, the Maltese authorities are worried with the ever decreasing number of British tourists coming over. When compared to the first six months of last year tourist arrivals increased by four percent. There are indications that there was an increase in the peak summer months as well. Four and five stars hotels have reported increases in their occupancy levels in the first six months of 1999.

Labour and employment: The number of registered unemployed last September was 115 less than the previous month, and stood at 8011 or 5.5%. However this was still an increase of 827 over September of last year. Last September there was an increase of 300 jobs in the public service, an increase of 17 persons employed in the private sector and a decrease of 158 jobs in direct private production. The total number of people in the job market stood at 138,500.

Cost of living: Last September the Retail Price Index went up by 0.49 points or 0.44 per cent over August and reached 110.62. This was due to higher average prices for fresh meat, potatoes, fresh vegetables, fresh fruits, personal care and health items, and public transport. On the other hand price drops were recorded in respect of furniture, household appliances, hardware, crockery, cutlery, cleaning materials, and clocks and watches. In September 1999, the rate of inflation stood at 1.73 per cent, whereas in the same month last year it stood at 2.95%.

Growth: The increase in the new job opportunities together with an increase in the export area show that there is growth in the Maltese economy. Private consumption expenditure as well as an increase in the services industry have also contributed to the growth. When compared to the first half of last year real growth in the gross domestic product (GDP) has been of four and a half percent.

General Comment: With the Government's large structural deficit, rising unemployment, low rate of inflation, rise in tourist arrivals, and slump in the retail trade, the country's economy and finances are not in a good shape. The economy is in the process of restructuring as a result of Malta's bid to join the European Union. More public companies will be privatised to generate revenue to pay for the public debt. The plan will be announced in the Budget speech. The general feeling in Malta is that the Budget will be another package of austerity measures in an attempt to bring back the country's finances and economy in a healthy state and comply with the rigid criteria for membership in the European Union.

 

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