The predicted slowdown and sustainability

Last Updated on Thursday, 15 June, 2023 at 2:29 pm by Andre Camilleri

Silvan Mifsud is director of Advisory at EMCS Tax & Advisory. Mr Mifsud is also a council member of The Malta Chamber

In Q1 2023, Malta’s Gross Domestic Product (GDP) rose by 3.1% in volume terms. That’s the smallest growth Malta registered in Q1 since 2012, if we are to exclude the 2020 and 2021 pandemic effected years.

Wholesale & Retail trade, Information & Communication, Financial Services and Arts & Entertainment (online gaming) were the sectors that have seen the main slowdown in growth in Q1 2023 when compared to Q1 2022. 

If we were to have a look at GDP from the expenditure side, it is interesting to see that in Q1, people reduced the volume consumption of food and non-alcoholic beverage, likely due to rising prices, when compared to Q1 2022. Other decreases in volume from a GDP expenditure perspective where in Clothing & Footwear, which is still heavily below the volumes registered in Q1 2019. Increases were then registered in volume from a GDP expenditure perspective in the sectors of Communication, Recreation & Culture and Hotel & Restaurants, with the last two sectors edging back to the levels in 2019, prior to the pandemic. However overall, it is very likely that consumers in Malta have used the savings accumulated during Covid and considering the inflationary period experienced are likely to be more cautious, especially when it comes to certain expenses.

It is also important to note that while Gross Value Added from a volume output perspective increase by €114m when comparing Q1 2023 to Q1 2022, the compensation of employees when looking at GDP from the income side increased by €149m. This likely indicates that the overall increase in GVA is fuelled from an increase in employee wages, while overall companies are seeing a decrease in profits. 

Compared to the EU’s GDP Growth in Q1 2023, it was only Cyprus and Spain that had a GDP volume growth slightly larger than Malta’s. This meant that when taking the EU average GDP growth in Q1 this stood at 1%, meaning that Malta’s GDP growth was three times the EU average’s growth.

On the sustainability front, Eurostat has issued an interest statistic. In 2022, the EU carbon dioxide (CO2) emissions from fossil fuel combustion (oil and oil products, natural gas, coal and peat) for energy use in the EU territory reached almost 2.4 Gigatons (Gt), indicating a decrease of 2.8%, compared with the previous year. CO2 emissions from energy use are a major contributor to global warming and account for around 75% of all man-made greenhouse gas emissions in the EU.

As seen below, in 2022, CO2 emissions from territorial energy use decreased in 17 EU countries. The largest decrease was registered in the Netherlands (-12.8%), followed by Luxembourg (-12%), Belgium (-9.7%) and Hungary (-8.6%). On the other end, Bulgaria registered the biggest increase in CO2 emissions (+12%), followed by Portugal (+9.9%) and Malta (+4.1%).

This shows that we still have further inroads to do in order to reduce CO2 emissions in Malta to produce energy, possibly from renewable sources.

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