Last Updated on Thursday, 22 February, 2024 at 1:36 pm by Andre Camilleri
The EU Commission has recently issued its Winter Economic Forecast. With regards Malta and its economic growth it mentioned the following “In 2024, growth is revised up compared to autumn, to 4.6%. It is set to be driven by net exports and private consumption, which should continue to grow strongly even if at lower rates than in the previous two years. Investment growth is expected to pick-up after the construction slowdown and public consumption is set to remain strong. Growth in 2025 is forecast at 4.3%, broadly unchanged from autumn, with the growth rate of consumption, investment and net exports stabilising at slightly lower levels in comparison to 2024”.
In a nutshell our economic growth in 2024 and 2025, which is much higher than that of our European counterparts, will be deriving mostly from Tourism (exports) and from private consumption. This is not a surprise, as after government’s last expansionary budget, it is obvious that this would boost private consumption. Here, my primary concern here is that when an economy is already operating at its maximum potential output and is further stimulated, it must enhance productivity to meet the heightened demand; otherwise, increased demand will lead to higher overall prices. Thus, my main message to business owners and leaders, is that this forecast is indicating that as the economy keeps growing, the labour market is going to keep getting tighter. This means that to keep growing your respective businesses you need to increase your productivity by becoming more efficient in the way you operate and not compensating for your inefficiencies by employing more people.
Like in other European countries, farmers in Malta have been protesting. I can understand and agree to some of the points they make. I understand that the EU needs to consider the real effects of its Green Deal project.
I also agree that as per competition rules, it’s essential to ensure a fair and equal environment for all participants. Therefore, it is contradictory to expect European farmers to adhere to stricter environmental regulations while simultaneously accepting the importation of produce from non-European sources that do not observe these same environmental standards. However, I can never agree to anyone requesting that any European country, including Malta, needs to stop importation of foreign agricultural produce of whatever type, to protect home-grown produce. It is true that from a risk and strategic perspective every country needs to have an element of home-grown agricultural product. I also agree that we should embrace and incentivise the latest technologies that allow us to increase the production of home-grown agricultural products. However, I believe we can never rely 100% on home-grown agricultural products.
Let me try to use statistics to put this into perspective. The below table is the number of gainfully occupied persons in the Agriculture & Fishing sector for the past 20 years or so. As can be seen, though there has been some changes, it is quite obvious that this sector did not grow and attract as much persons to allow Malta to be completely dependent on local produce.
Our economy has experienced significant growth, leading to an influx of individuals coming to work in Malta and an increase in tourists visiting the country. This surge in population demands higher levels of food supply, which cannot be solely met by local produce.
Ultimately, when governments intervene in a free market, effecting any price on a supply-demand equilibrium, various persons with different interests would start expecting that what was done at one end, can now be replicated anywhere else. As the infamous Humphrey Appleby used to say, in the popular British Yes Prime Minister comedy, that is a very slippery slope to be on.
