The news that Malta is technically out of the recession is good news but it is no cause for celebration. The latest release of GDP statistics, shows a growth of 0.9% in the second quarter of this year. This follows two negative quarters; a contraction of our GDP by 0.7% in the fourth quarter of 2011 and by 1% in the first quarter this year.
The Gonzi government seems to want to take credit for such a development. Considering that the Maltese economy was technically in a recession at a time when the Euro area was not and considering that the growth in Q2 is 0.9% whilst the Maltese economy contracted by 0.7% and 1% in the previous successive quarters, there is very little to shout about.
NSO statistics for Q2 of this year are positive news. This data was most welcomed by one and all. But we should not sit on our laurels. It is not enough. We have moved a step ahead after moving several steps backwards. The aim and duty of any government is not to minimize an economic disaster but to achieve positive balances that would help improve living standards for its people.
The Main Labour Party spokesman for Economic Development, Financial Services and Pensions, Dr. Charles Mangion said that the growth achieved in this quarter is not sufficient for a country that aspires to have living standards converging at EU levels at an acceptable pace. Malta is still lagging far behind.
An analysis of the latest GDP data shows that domestic demand, comprising of household and government consumption, and investment (excluding inventories) continued to contract. Charles Mangion said that the current data amplifies the negative trend in domestic demand, which is in turn entirely attributable to worsening consumption trends for local households. “Indeed, investment has been declining for at least the past successive six quarters”, added Charles Mangion.
Once again, official figures belie the statements of our Minister for Finance. Tonio Fenech was quoted as saying that the growth in GDP was also due to higher investment. His statements and data published by his government’s statistical arm do not tally. Fenech keeps giving completely wrong interpretations.
In manufacturing, Tonio Fenech misinterprets the statistics. He claims that activity in manufacturing was growing although the positive effects, according to him, were masked by problems in the energy sector. He has overlooked the fact that the NSO data shows value added for manufacturing separately. This fell, in nominal terms, by 1.6%, with profits and wages each declining.
The finance ministry wrongly prides itself that the economy was growing with better paid jobs. One wonders where the Minister obtains his figures from. The data shows that growth in compensation to employees slowed down to 2.6% in Q2 of 2012. When one compares this slowdown of growth in disposable income with the fact that inflation in the same period went up to 4%, it is very clear that in real terms compensation, to employees fell, implying a further loss in purchasing power.
The answer to all this is that in real terms, wages continued to decline, implying that Maltese families continue to remain in recession. With reduced spending power, a consequential effect can be seen in the fall of household consumption. Eurostat have published data that show that this has fallen throughout 2012. This confirms what the PL spokesman said: “that Malta has been recording one of the strongest declines in retail sales in the EU.”
There is no joy in reporting these facts, but far less in coping with the current standards of living. Whereas technically Malta is out of a recession, our families are still living through it and being pushed deeper into it. This is why the living wage, to which PL leader Joseph Muscat has been referring, is of utmost importance.