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Stronger fiscal measures needed to contain age-related costs, Central Bank
Government must focus on controlling its deficit and consolidate fiscal measures, according to the Central Bank’s latest quarterly review for 2011.
In its analysis of fiscal developments, government deficit narrowed to 3.6% of GDP during 2010, from 3.7% in 2009, reflecting stronger revenue flows and expenditure restraint. However, the general government debt continued to rise, reaching 68.0% of GDP in 2010.
“Policy efforts should focus on additional fiscal consolidation measures, especially in the light of rising age-related costs, the expectation that the structural balance will fall short of the medium-term objective of a balanced budget and financial markets’ ongoing reassessment of sovereign related risks,” the Central Bank said.
“This consolidation process should be supported by structural reforms aimed at fostering growth and strengthening competitiveness.”
During the last quarter of 2010 economic activity moderated in the major advanced countries. In contrast, the main emerging market economies continued to register strong growth. Inflationary pressures rose globally, mainly reflecting further increases in food and commodity prices.
Real GDP expanded by 3.9% on an annual basis during the fourth quarter, a faster rate than in the previous quarter. Growth was primarily driven by domestic demand, particularly investment, with net exports contributing marginally.
Labour market conditions generally remained favourable during the quarter, as reflected in a drop in the number of unemployed and increasing employment numbers. The seasonally adjusted unemployment rate fell to 6.5% in December.
The Review also notes that during the fourth quarter of 2010 the deficit on the current account of the balance of payments remained largely unchanged from that recorded in the same period of 2009. In contrast, over the year as a whole, the current account deficit narrowed to 4.1% of GDP, as against 7.0% in 2009.
As regards price developments, the Review observes that inflation continued to rise, reaching 4.0% in December from 2.4% in September, with the higher rate of inflation mainly reflecting rising prices of services, non-energy industrial goods and energy.
Developments in competitiveness indicators were mixed in the fourth quarter. Unit labour costs dropped, as compensation per employee fell more strongly than productivity. Conversely, the nominal and real Harmonised Competitiveness Index increased, signalling a deterioration relative to September.
The Quarterly Review is available on the website of the Central Bank of Malta at www.centralbankmalta.com
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Stupid comments apart, the report shows that the economy is doing quite well, increase in GDP, lower unemployment, reining in of the budget deficit and the national debt etc. Is this performance happening by chance? Can the administration claim any credit? I feel the government must be given some credit, things don't just happen. When a ship enters the safety of a harbour, the crew must have done their job. Should we not be more interested in whether cabinet is delivering the goods rather than in what they earn? Do the earnings of ministers and other MPs affect our life styles? If I earn Eur x, whould I be affected in any way by the salary of a minister? I guess not? But I would be affected if cabinet dooes not deliver the goods. Do the economic indicators of today show that the economy is performing better than a decade ago? Definitely they do. Is the quality of life today better than a decade ago. Everybody agrees that the Maltese have never had such a high quality of life. These I think are the salient points, the rest is just rhetoric
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I think stonger fiscial measures should be adopted and focused on cutting the ministers salaries. These ministers are a very big burden to society with zero economic contribution! Students are also becoming a big burden to the economy from the stipends they are getting!
Who has the cheek to say that the pension system is unsustainable if not the government themselves?
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Hemm soluzzjoni facli ghal Gvern ta' Gonzi biex ikun sallab lil kullhadd sewwa, jnaqqas il-penzjoni halli nigu sewwa u mbaghad kull ma jkun fadallu hu li jidfinna hajjin ghalli hu u shabu jkollhom minn fejn jiehu z-zjieda u l-paga bhal Inglizi. Ara ghalina ma jimpurtah xejn li mhux qed nithalsu bhall Inglizi, x'jigi jitmellah hu u shabu minnha l-aqwa li bwiethom minfuhin biz-zjieda li hadu.
