The Central Bank of Malta, run by the ex PN minister Prof Josef Bonnici, stated in its latest Quarterly Review that the recovery in the Maltese economy is expected to be “weaker than forecast earlier”. The Bank is estimating GDP growth of 1.1 percent this year down from an earlier estimate of 2.2 percent and contrasting sharply with the PN’s electoral pledge of 2.3 percent.
The Central Bank says that “the deteriorating economic outlook in Malta’s main trading partners in the context of persistent uncertainty about the euro area, as well as weak global business and consumer sentiment” contributed to its downward revision. The Central Bank has joined Standard&Poor’s in finding the PN’s economic forecasts as unduly optimistic.
Like the EU Commission in its Winter 2013 Forecast, the Central Bank of Malta expects GDP growth this year to be driven mainly by private investment (+2.6%) and consumption (+0.6%). Net exports are only expected to contribute marginally to growth, as a result of what the Bank describes as a fragile external environment. The Bank forecasts that unemployment will remain at a rate of 6.3 percent. But what is even more damning for the PN, the Bank expects employment growth to slow down to 1.1 percent from last year’s 1.5 percent. So much for Gonzi/Busuttil’s 25,000 jobs chimera.
In a further damning forecast, the Central Bank expects the general government balance to deteriorate again to 2.8 percent of GDP, after last year’s slight improvement. It says that the effect of one-off receipts will have worn off and that the ratio cannot but go up unless consolidation measures are taken to replace them. Yet, analysts point out, the PN has irresponsibly projected to spend a whopping €1.0bn in a desperate attempt to lure voters back to it without as much as giving a thought to the state of the public finances.
The Bank also expects the Public Debt to rise further by almost a percentage point to 73.1 percent this year.