Positive IMF certification a tribute to Gonzi’s administration, PN says

The Nationalist Party has welcomed a positive certification of the Maltese economy by the International Monetary Fund, which yesterday described Malta's as being amongst the best of the eurozone despite pressures from the international financial crisis.

"It's a positive certificate for the Nationalist government's prudent economic management," the party said. "The 2012 report for the government led by Lawrence Gonzi shows what good decisions were taken to ensure a strong and resilient economy, in spite of the difficult international economic situation."

The PN said that the former administration's economic stewardship created thousands of new jobs irrespective of Labour's tactics in Opposition in at attempt at slowing down the government's work.

"The report now warns the government to keep its finances on a sound footing. As the party in opposition, the PN will give its contribution so that our country retains this strong foundation and we augur that it won't be Labour to dismantle these good foundations."

The Maltese economy's average growth gave it the best performance in the euro area, despite its deteriorating fiscal position and a high public debt.

The International Monetary Fund's concluding statement to its Article IV monitoring of the Maltese economy, released 15 May, found Malta's resilience had been backed by its sound banking system and robust growth in exports.

FULL REPORT Article IV Concluding Statement

The IMF also said it supported the new government's plans to diversify energy production, but warned that reducing energy tariffs must complement a reduction in costs of generation and restructure Enemalta's financial situation.

READ MORE IMF reporting - May 2012

But economic growth slowed to 0.75% in 2012, mainly due to the weak external economy in the rest of the EU and dampened demand domestically.

The forecast is that economic growth will gain traction between 2013 and 2015, with Malta "continuing to outperform the euro area average" through a recovery of private consumption and improved confidence.

The IMF said Malta's deficit in 2012 stood at 3.3% of gross domestic product, which will trigger a reassessment of Malta's public finances under the EU's Excessive Deficit Procedure.

But it also notes that the new Labour government's budgetary measures in 2013 "are expansionary" even though the tax cuts that will affect high earners up until 2015 will still generate optimistic revenues as long as there is moderate growth.

The IMF said Malta has to adopt more measures, ostensibly spending cuts and revenue-generation measures, to bring the deficit to below 3% and put public debt on a sustainable path. "The focus should be on tightening controls on the growth of health spending, greater use of means-testing for government benefits, and containing the wage bill through prudent collective wage agreements and compression of public sector employment through attrition."

Malta still remains exposed to the risk of less trade from the EU if financial stresses increase on the continent, as well as the ubiquitous spillover from banking and financial markets that encounter trouble. But the IMF says Malta's low reliance on foreign debt, its resilient financial system, and households' savings limits the island's vulnerability against these external risks.