That December Feeling

1^st December 2006
The Malta Independent - Friday Wisdom

 

Unbelievable how time flies! Eleven months of 2006 are history and today we start the last month leading to a James Bond year.

Government is softly, softly slipping into an electoral mode and is doing all that is possible to create that feel good factor which has been missing since soon after the last election we discovered that rather than having government finances on a strong footing much more belt tightening was needed to come into euro shape.

Now no opportunity is lost to inform us that, inflation permitting, we are already in euro shape. This is however not the same as saying that we are in good economic shape. Having public sector deficit, public debt, interest rates, exchange rate and inflation within or moving gracefully towards the Maastricht criteria, is not necessarily synonymous with an acceptable economic performance.

The true criteria for the latter are much wider. They have to include employment creation, labour participation, balance of payments situation, level of investment and overall size and nature of economic growth always benchmarked to that of our main competitors which in our case ought to be the new members of the EU rather than the old ones.

Yet there is no denying that achieving a smooth fusion into the euro monetary system is an important economic milestone which could be a catalyst for the achievement of the wider economic objectives. The euro project will dominate the economic calendar of 2007 and will no doubt be used by the government to generate a sense of pride and achievement which will generate a feel good factor for an election which could be held with a few months on either side of the actual euro entry in January 2008.

This December, possibly being the last Christmas month before the next election, will be a good launching pad for the government to stimulate such feel good factor so essential for the electoral democratic test. Facing the run up to Christmas with budget discussions well behind us will no doubt help to focus people’s attention on increased consumption which is typified by the quantity of people in our best shopping streets and malls.

The new traffic and parking arrangements for Valletta, which are only suffering the consequences of their success in that the car park at Blata l-Bajda gets full too early each morning, should make more people rub shoulders in our Valletta streets and in the process rubbing on each other the feel good factor which comes from the joy of Christmas shopping.

International events are also helping to permit the government some latitude to engineer an immediate increase in the spending power of the population without involving budgetary measures. Free parking for Valletta shopping is a small but significant contributor in this regard. Shifting the wardens’ focus from negative fine levying disciplinary attitude to more positive supervisory and environmental duties also eases a drag on the feel good factor.

However it is the happenings in the international energy and foreign exchange markets which are the best harbinger of good news to the local consumer. With oil prices stable at around 60 dollars well off the peak of 78 dollars hit earlier this year, and with the US dollar sliding back in value against the euro, and consequently against the Maltese lira, to the lowest levels last seen this time in 2004, will permit the government to announce on this very same day a substantial reduction in the surcharge on utility bills and reduction of fuel prices at the pump.

All these things falling together at the right time seems to be a coordinated effort, aided by a stroke of international luck, to generate what the GRTU has proclaimed as having the prospect of being the best Christmas for a very long time, from a commercial point of view.

Other measures of a more social nature should also help in having a better Christmas than last year. Certainly the curtailment of open bar parties is an overdue step in moderating the binge drinking culture among our youth.

Yet even while enjoying a good December and a peaceful holiday season we must not think that all is fine and dandy. The fact that the economic situation is better than it was in the first half of this decade is not the same thing as saying it is fine and where it should be.

With tourism, one of our most forceful economic engines working at half throttle, we can never be satisfied with our economic performance. What can sustain or wither away the December feel good factor for the rest of the run up to the general elections is the performance of our tourism sector where we have long been operating well below our capacity.

If we can put our house in order from a (hard and soft) quality point of view and render Malta as a cool destination on the European tourism map, possibly aided by the availability of flights on newly operating low cost airlines, next year we can possibly have the best performance in tourism since the turn of the millennium. No other industry can have the same multiplier effect generating a sustainable feel good factor than tourism, where the value added stays locally given the domestic ownership of most tourism outfits.

Our performance in the tourism sector next year could make or break the feel good factor which this December could help set in motion.