Monday, 23 January 2012

IMF report is no certficate for government

The PN is trying to interpret this report as some certificate of competency to its government wrapped in a warning that any change of administration through democratic elections could jeopardise our economic prospects.

In its annual report the International Monetary Fund (IMF) has issued these warnings to Malta:

  • Malta needs sound governance, effective supervision and robust financial buffers.
  • The policy challenge is now to balance the imperative of maintaining growth and employment against the pursuit of long-term fiscal sustainability.
  • Malta has to navigate very difficult international environment
  • Malta's resilience to date cannot be taken for granted
  • Malta's economy now faces a worsening external environment that has created new risks and headwinds to growth and financial stability.
  • Uncertainty in economic policy could adversely affect growth if investment decisions and structural reforms are put on hold.
  • Malta's GDP growth  for 2012 is expected to be 1% compared to the 2.3% growth assumption made at last Budget presentation in November.

This is a totally distorted interpretation to what the IMF actually said.    If I were to put the IMF's report message in simple language it would read:

Malta has a very versatile and resilient private sector whose resourcefulness, hard work and zeal make up for the deficiencies of the  public administration; but the government has to be careful not to take the private sector's resilience for granted and should work on a truly fiscally sustainable programme as the private sector's willingness to lend on the cheap to the government is not infinite
Malta's economic resilience is shown by our record of turning crisis into opportunities.  The oil crisis of the 70's was used to stimulate an inflow of foreign direct investment in manufacturing that was looking for a cheaper production base to remain competitive.  Some of these industries are still here like Brandt, Merit, and Malta Hospital Products and Malta Netherlands Pharmaceuticals although they have evolved and changed names.   The recession of the 80's brought us ST Thomson.

Even the current crisis has had its silver linings for Malta.   The opportunities of the new realities in Libya;   attraction of tourists who normally would have gone to Egypt or Tunisia;   financial services attraction for offshore funds to register in Malta and come into an EU respected onshore regime.

So far the Euro crisis has been a benefit to our tourism sector.   The Pound Sterling has strengthened and the German economy is booming.  So these two main source market have more than made up for losses from lesser markets like Spain, Greece and Italy ( Italy was always very seasonal and very specifically related to Casino business which has kept its momentum).

So a change of government should not only mean continuity of investment policies but in reality we could benefit from having a government that really respects sound governance so as not to abuse of the private sector's goodwill to keep the economy going and to continue financing government needs without any recourse to foreign borrowing.

Credit should be given to whom it is due.  The Maltese economy has performed in spite of, not because of this government.

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