A look back at the government's performance in 2002

"Notwithstanding that our country has an economy that is small and vulnerable to all that happens worldwide, we held our own, and not only did we not slump but we continued on our way forward.

The last fifteen months were extremely difficult for every country worldwide. Large and small countries, strong and weak, rich and poor, all felt the pressure on their economies that came both from the adaptations needed to be made after the fast changes in the previous year and from the big uncertainties of a future clouded by the fear of violence and terror.

We laboured on prudently.

We were not scared by the odds against us. We managed to overcome the negative effects that were thrown at us. We undertook measures, even at no small risks, so that we could overcome adversities and our people would continue to live better off.

At the same time, we continued with our structure building so that, like an orderly and modern society, we could share a place at the main European table where important decisions are taken that impact on our lives and on those of our present and future generations.

A major global change is taking place, a change that will accelerate in the future. Our country must face all this change with the difficulties and opportunities that it may bring. It would not be possible to stay still as if we were rooted to where we stand. We must undertake the necessary steps with determination, courage and judgement in order to go forward. We must choose the right road that leads to realistic opportunities and that is opening up in front of us, with all its uphill and down hills. If we are tempted to open up ourselves to a world of fantasy than we are condemning our country to fall back. The wizard of Oz does not exist.

After the devastation of the 11 September of last year and the shock on a major number of countries, consumption declined all round.

Because we acted judiciously and undertook timely corrective measures, the negative impact did not exert undue pressure on us as it did on our neighbouring countries and on small states like ours.

The Gross Domestic Product

After we experienced a decline of 0.8% last year, our Gross Domestic Product this year is projected to increase by 2.7% in real terms mainly as a result of an increase in public and private consumption as net exports may take longer than expected to pick up.

Employment

We have also succeeded to increase employment even in such difficult times. In the first nine months of this year, 300 new jobs were created in the private sector so that at present we have 88,268 employed full time in the sector. During the same period, permanent employment in the public sector went down by almost 800 jobs so that we now have a total of 47,651 persons employed in this sector full time.

Economic Activity

Income from the private sector also went up. Since this Government came in power four years ago, income increased by Lm48 million, when compared with the first nine months of this year. Those with acumen, instead of giving in to fear that is spread around by those who, because of lack of vision, fear change, recognize that the upcoming change will bring about opportunities that we can all take advantage of.

Tourism

Government showed foresight particularly in the tourism sector as this was mostly and negatively hit by the worldwide recession and by the events of the 11 September 2001.

The Freeport

As a result of managerial efforts, we expect that this year will end up better than when it started - with contracts worth around Lm1.5 million TEUs annually.

Privatisation

We continued our work on privatisation and we succeeded to finalise the choice of a strategic partner for the Malta International Airport plc and the sale of 40% shareholding.

The Malta International Airport plc

One may recall that the previous Government was about to transfer 40% of the Malta International Airport plc., with all its pertaining assets, that is, the Air Traffic Control Services and the Airport Security Services, as well as the full ownership of the terminal building. The price tag for all these assets was Lm12 million.

Malta Freeport Terminals Ltd.

In the case of the privatisation of Malta Freeport Terminals Ltd., Heads of Agreement, that relate mainly to commercial issues, were recently signed with a bidder.

Public Lotto

Negotiations on the privatisation of Public Lotto are about to be finalised and discussions are currently in place with Lotto Receivers.

Mediterranean Offshore Bunkering Company Ltd.

We have now launched the privatisation process of Malta Offshore Bunkering Company Ltd., and, only recently, a call for interest was published.

Monetary Policy

For a long number of years, now, we have been pegging the Maltese lira to a basket of currencies that reflects our external trade relations. We have, this year, reviewed this currency basket so that a share of the US$ weighting was passed on to the Euro. Therefore, now, the Euro makes up 70% of the Maltese lira, the British pound 20%, and the US$ the remaining 10%.

The Monetary Sector

Bank deposits increased substantially and have now reached Lm2.3 billion. This represents an increase of Lm289 million for this year and an increase of Lm702 million since this Government first came to power four years ago.

Foreign reserves expanded substantially and currently amount to Lm1,304 million: an increase of about Lm220 million from last year and of Lm440 million since this Government came to power four years ago.

The Balance of Payments

In the first nine months of this year, the current account or that which shows the difference between the outflows and inflows of foreign exchange in the balance of payments, has registered a decrease of around Lm14 million when compared with the same period last year. This is the result of less income from services and current transfers that was partially offset by an increase in trade transfers and from income from investments.

Inflation

Inflation is also under control and compares well with the levels found in advanced economies and in the European Union. For the twelve months up to September 2002, the average inflation rate was 2.9%. According to the current method of calculation in adoption since 1990, this inflation rate translates into a cost of living increase of Lm1.75c per week.

Developments in the Financial Sector

Financial Services

The financial services sector is rapidly growing and presently, this sector contributes 12% of the GDP while it provides work to about 4,900 employees excluding another 250 on a part-time basis. These do not include audit firms that operate in this sector.

The Stock Exchange

Corporate bonds placed on the market during the year that were immediately over-subscribed. This is evidence of the excess liquidity that exists in the market.

Share trading on the Stock Exchange was subdued although the recent share issue of MIA shares was wholly subscribed.

As we compare the Share Index of our Exchange over these last five years with those of others worldwide we observe that, while our Index has not been similarly hit, it does not move in line with international trends.

The Financial Situation in 2002

A look at the financial situation reveals that even in difficult times, we retained control over the fiscal deficit and we have kept it at the level we had targeted for.

Hence, the imbalance in the Consolidated Fund this year is expected to be Lm78 million, this is within the limits of our projections made in November last year. This imbalance represents 4.6% of the Gross Domestic Product. It means further that the deficit was reduced by more than Lm7 million from the previous year.

One should note, that in the plan that we drew up in 1998 for the following six years, this year's deficit had been projected at Lm125 million. This means that we improved the position by Lm47 million.

Government's revenue in 2002

The receipts this year, notwithstanding the tax deductions of last year, will go up by Lm78 million. This makes up Lm11 million more than we had projected in November of last year.

This increase is the result of the Government's ability to administer and negotiate well. It is the result also of the fact that, notwithstanding, like in all other countries, we had a great pressure on Government's revenues as a consequence to economic slowdown, we succeeded to stand our ground, as this Government is not one that shudders and shuns away from problems.

An overview of the revenue figures shows that, in all instances, receipts were in excess of last year, even deducted the one-off payments.

Public Expenditure in 2002

Public expenditure is also under control. Total recurrent costs went up to Lm721 million, of which Lm64 million are public debt interests costs, Lm197 million are wages, Lm343 million are social programmes, Lm70 million are contributions to Government entities and public institutions, among them the Shipyards, Water Services Corporation, the University, MCAST, all Regulatory Bodies and Zammit Clapp Hospital, etc. Operational and maintenance costs in 2002 are expected to amount to Lm47 million.

Total public expenditure in 2002 is expected to go up to about Lm825 million, that is, around Lm12 million more than what we had originally projected and around Lm71 million more than last year.

CONTINUE...