As we are now just a few days away from Christmas I am reminded of the importance of facing one’s reality. In the infamous Christmas Carol by Charles Dicken we learn how Scrooge was only able to really change his ways when he was faced with a vision of his own neglected grave and the horrific reality he would end up in. As Buddha says: “All human unhappiness comes from not facing reality squarely, exactly as it is.” Yet, I strongly believe that as a nation we have a big difficulty accepting the various realities of the world around us and even more, we find it hard to accept the realities we create by our own decisions.
Taking just a couple of recent publications, we can join the dots to understand our present economic reality. The latest registered employment statistics, published on 18 December, show that the amount of gainfully occupied in Malta has risen by over 19,000 or 7.5% from the end of July 2022 to the end of July of this year. Add to that the recent reply to a parliamentary question that outlined that in 2022 more than 27,000 permits were issued to TCNs in 2022 alone, more than the permits issued for TCNS between 2019 to 2021.
On the other hand, on 15 December, the Central Bank of Malta issued its updated economic forecast. Such forecast claims that: “According to the bank’s latest forecasts, Malta’s GDP growth is projected to moderate from 4.3% in 2023 to 3.8% in 2024… in 2023, net exports are expected to become the main contributor to GDP growth. In 2023, domestic demand is expected to lower growth, as negative base effects related to extraordinary outlays in aircraft in 2022 are set to reduce private investment in 2023, offsetting positive contributions from government and private consumption. From 2024, domestic demand is expected to be the main driver of growth, as private consumption growth continues to grow at a brisk pace and private investment begins to recover. Net exports are also projected to contribute positively for the rest of the forecast horizon, driven mainly by growth in services exports. In view of current high inflation, as well as tight labour market conditions, nominal wage growth is projected to be relatively strong from a historical perspective. Compensation per employee is thus projected to grow by 6% in 2024, 4% in 2025 and 3.1% in 2026. Indeed, real wage levels are expected to recover by 2024. A persistently negative employment gap implies that labour market tightness will be a key factor driving the wage outlook.”
This means that our economic growth model is expected to remain what it was into 2024. An economic growth model that requires an increase of 7.5% in gainfully occupied to deliver a 4% GDP growth. Then, as a nation, we act surprised if, as a result of our economic growth model, which is sustaining demand by various subsidies and increased handouts leading to a tight labour market, we have to face the consequences of such an economic growth model. We act shocked and surprised by an increase in the price of milk, as our national milk producer has to face higher labour costs as a result of the mentioned tight labour market, even though we are subsidising energy costs and animal feed. We also act surprised if, as a nation, we have to face higher car insurance premiums as a result of not only higher spare part costs but also a result of more people living in Malta leading to more cars on the road and lack of decisions to disincentivise private transport. Not only do we fail to accept the reality of the consequences of our economic growth model, but there are some, among us, who add insult to injury and push the narrative that such consequences are due to greedy local businesses, thus trying to depict all of Malta’s businesses like a bunch of greedy robbers.
Which brings me to a full circle. As a nation, we feel that it is almost our divine right not to face the realities that other countries are facing. Politicians play a big part in fuelling this expectation, thinking that they can keep postponing facing harsh realities, hoping that by doing so they are buying time to allow world realities to change for the better and hence avoid any need for change. This may work once in a while, but it cannot work all the time.