Don’t be put off by the title. I haven’t lost my marbles, though I might well lose a few by the end of this year if the country’s economic boat, struggling in troubled waters, doesn’t change tack from its current disastrous direction.
Sadly, not whilst having a Prime Minister uttering such jejune views as “isn’t obvious that the domestic economy has its cycles?” He was not talking about an economic cycle, but simply on the government’s worsening fiscal deficit during the course of this year so far.
It appears to a seasoned economic analyst that the premier’s adviser on matters economic and fiscal is a female, to whom cycles are naturally considered in monthly movements. In economics nobody has ever ascribed cycles in terms of months, but generally a minimum of five and a maximum of ten years. In the world of finance, cyclical connotations are unknown since cash-flows supersede and obviate them.
Typical of GonziPN: inadvertently, it insults the average citizen by assuming they don’t understand even the basic elements of economics and finance. So, talk nonsense, try to appear innovative, and thus you keep the people constantly in awe of your sagacity.
Gonzi endeavours to defend his Finance Minister every time he resolutely maintains that the government would meet its commitment on target deficits with the E U Commission, this year at 2.2% of the GDP. Despite:
1. Experiencing a 3.3% of GDP by the end of the first quarter and in recessionary conditions;
2. Further widening it to € 333.3 million by end-July 2012, but unable to express it as a GDP % because, although the result of the second quarter has long been handed to the eurozone (which incorporated it in its own Q.2/12 assessment of the whole zone), is still withheld from us Maltese citizens. If this figure of € 333.3 for 7 months were to be annualised at 2.2% (as targeted), the GDP this year would need to reach € 26 billion - four times reality!
3. With capital expenditure at € 182 million for 7 months to July, there isn’t much the Minister can do to delay payment till 2013 - the usual ‘window-dressing’ permitted by our reluctance to convert our national accounting system to an accruals one.
4. Still waiting to learn whether the recession persists or whether we managed to slip out of it by June. And we are in September. We cannot even be guided by the 5.5% increase in government revenue over the previous year, which could well be due mostly to inflation, which itself stifles growth. Incidentally, recurrent expenditure went up by around 10% over 2011 - a very relevant indicator.
5. The Central Bank’s stern warning that “additional fiscal measures” may have to be taken this year (not much time left!) for the deficit target to be met. Simultaneously, the Central Bank lowered our growth projection to 1.4%, as it also reminded the government that its debt at 75% of GDP ( more, if guarantees are included, as they should ), was meant to be reduced by at least 0.5% each year - equivalent to around € 35 million in surplus !
Is it surprising that I opted to describe GonziPN as being in a state of discombobulation in preference to confusion?