Finance minister Edward Scicluna: Malta not yet experiencing economic boom

Calm down everyone. The economy is not passing through a boom.

At least that’s what finance minister Edward Scicluna would have us believe in a recent video-blog that dismisses claims that Malta’s growing property bubble could suddenly burst.

“What we must prevent is a boom that will carry the seeds of its own destruction,” he says in the video.

The clip posted on his own website and Youtube comes at a time when the island is in the grip of a construction frenzy with plans for some five high-rise projects in the St Julian’s area alone.

But while no one denies that Malta’s wealth is evidently growing, it is the distribution of all that wealth that is become a major issue for the government ahead of its forthcoming Budget in 2017.

 “The first risk is that expectations start increasing: people demand they take a share from the growing wealth they see around them. The problem is how income will be redistributed, and how to face poverty and equality,” Scicluna says in the video.

Meanwhile, Joe Farrugia, director-general of the Malta Employers Association, also referred to the widening income gap this week. “There are vulnerable groups that may be experiencing a decline in their purchasing power,” he said, referring to pensioners and single parent families especially. “Rental costs are increasing due to higher demand by foreign workers…eroding the disposable income of persons and families who do not own their own homes.”

However, the finance minister said he was confident the government could steer a course for a sustainable economy without it becoming a bubble that eventually bursts.

Speaking further about this in his video post, he says: “A lack of housing can influence a rise in property prices. But objectively, it is a sign of higher demand and lower supply: it pays for people to build more and sell. There is nothing wrong with prices rising. Of course, there are those who will be affected negatively… as prices rise, the market will correct itself.”

He continues: “The same goes for foreign labour which requires higher salaries to attract, and is a healthy sign for the economy; meaning that it is better for foreign workers to come and work here.”

However Scicluna did warn success could make it too convenient to pay others to do your work for you, resulting eventually in a “sluggish performance.”

 “[It’s the] effort which in the first place got you to the top. When you’re comfortable, it’s not enough to simply wake up and let the others do the heavy lifting,” he said.