Moody’s report refutes government spin on Malta’s economy – MEP

Labour MEP Edward Scicluna is insisting that raising taxation to address the government’s revenue shortfall will not be sufficient to reverse Malta’s bond downgrading by Moody’s.

“The government’s attempts to blame the credit rating downgrade by Moody’s solely on the eurozone crisis had been flatly refuted by the agency’s report on Malta’s economy,” the MEP said.

“The government’s apologetic response to Moody’s downgrade is that this is the automatic response to the eurozone crisis rather than a judgement on Malta’s economic performance.”

Scicluna is arguing that not every country has been hit by the sovereign debt crisis in the Eurozone in the same way. Estonia and the Czech Republic for example have retained their A1 credit rating.

“The crisis has resulted in rating downgrades only for countries that were economically weak or had to provide life-support for their banks, adding that weak growth forecasts and low investment meant that it would be difficult for Malta to win back the coveted A1 credit rating,” Scicluna said.

The MEP says that even if the crisis ends tomorrow and Malta’s exports grow, the island’s maximum growth rate will only be that of 2% according to IMF estimates.

“The reason for this is the very low level of investment which falls well short of the level required for an A1 country. Moody’s says Malta’s projected low economic growth in the medium-term future will not lead to a debt reduction significant enough to win back its A1 status.”

Finance minister Tonio Fenech has defended his economic record, saying Malta’s economic growth during the year has been amongst the highest of the EU-27 member states with 2.8% in the second quarter of 2011 over and above the 1.6% EU average.

Fenech reiterated that the reason for the Moody’s downgrade was the inertia of Eurozone members and the negative impact this can have on the Maltese economy and its dependence on exports and tourism.

He also said Malta’s inflation rate in August was 2.3%, less than the 2.9% EU average. “The 12-month average rate was of 2.8% - exactly that of the EU average,” Fenech said.

Fenech said 6,000 new jobs were created in the past year, leading to one of the lowest levels of unemployment in the EU. “They are results we can be proud of. The Opposition offers nothing but confusion and a total lack of vision.”