Buoyant economic forecast for Fenech, who accuses PL of endangering economy

Finance Minister Tonio Fenech hit out at Labour's negative portrayal of the economy, as new predictions from the European Commission's spring forecast placed Malta amongst the top five performing members for economic growth.

"The responsibility of any jobs lost is on the shoulders of Joseph Muscat, for the constant negative picture they are painting of Malta's economy," Fenech said.

Malta's economic growth will be moderate in 2012, but Fenech put much store in the fact that the island was performing above the euro-area's average with unemployment levels, low deficit and inflation, and job growth.

At 2.1%, real GDP growth in Malta remained relatively robust in 2011, outperforming the average for the euro area (1.5%). Growth was driven mainly by net exports and household consumption.

"The moderation in economic growth that became evident in the second half of 2011 is expected to carry over into 2012, when growth is forecast to slow to 1.2%, before rebounding to almost 2% in 2013."

Net exports again are set to moderate in 2012, reflecting a weaker outlook for the tourist sector as well as a faster rebound in imports. The EC said consumer confidence is projected to remain low on the back of rising unemployment and real household consumption is projected to grow at a subdued pace.

But Fenech pointed out that unemployment will grow by 0.1% in 2012, while the EU average was predicted at a range of 0.8% to 11%.

In 2013, the main drivers of growth will be business investment and household consumption, while private investment is projected to recover gradually, supported by improved global growth prospects.

The planned construction of the electricity interconnector pipeline with Sicily will also provide a further boost.

Inflation averaged 2.4% in 2011, driven mainly by the food and energy components but it is forecast to moderate slightly over 2012, thanks to lower oil prices and the freeze in tariffs.

As in 2011, inflation in Malta is projected to stay slightly below the euro-area average in 2012 before climbing back above it in 2013.

Employment growth averaged 2.3% in 2010-11, outperforming the euro-area average thanks to a sizeable improvement in female participation and employment.

The general government deficit was 2.7% of GDP in 2011, slightly better than estimated in the autumn forecast (3% of GDP), mainly because of higher one-off revenues from the extension of the 2010 tax amnesty.

In 2012, the deficit is projected to narrow slightly, to 2.6% of GDP, while the primary surplus increases to 0.8% of GDP (from 0.4% in 2011). The forecast includes the impact of the measures adopted in the 2012 budget and the January cuts of €40 million in spending.

Government spending is forecast to rise by 0.3% of GDP, mainly reflecting a rise in subsidies to the Enemalta. The increase in net capital expenditure of 0.4% of GDP is mainly due to the planned equity injection into Air Malta (0.3% of GDP).

The deficit and debt outcomes could be higher, given risks to expenditure from the ongoing restructuring of Air Malta, the expected renewal of the public sector wage agreement and the financial situation of Enemalta.

General government gross debt increased by almost 10 points of GDP between 2008 and 2011, to 72% of GDP, and is forecast to increase to 75.2% by 2013.