Growth projection in 2012 ‘revised’ to 1.5% – finance minister

Finance minister Tonio Fenech said Malta will experience a modest growth in 2012 of 1 to 1.5%, after the island officially went into a recession after gross domestic product declined over the past six months.

While the target for growth previously announced in the 2012 budget of 2.3% will not be officially revised, Fenech's new projection now falls squarely within the European Commission's original forecasts for the year.

Brussels had already said Malta's real economic growth is forecast to decelerate to 1% in 2012, back in February 2012.

The growth figure will still be positive, albeit moderate, reflecting the sustained level of exports which grew by 3% in the last quarter of 2011 (compared to the same quarter in 2010) and by 0.79% in the first quarter of 2012.

Fenech told MaltaToday that this growth came notwithstanding decreases in exports by ST Microelectronics, the global semiconductor manufacturer whose exports account for a mighty 60% of the Maltese total.

"Manufacturing in general had a positive performance, and had not STM experienced this decrease in exports, we might not have had a negative growth," Fenech said.

"From the discussions I have had with STM, the first quarter results might well be reversed and exports resuming positive pace in the next quarter," Fenech said.

In a reaction tweeted from Dubai, where he led a Labour delegation to meet executives from Smartcity operators Tecom Investments, Opposition leader Joseph Muscat said Fenech's declaration was a U-turn. "#Fenechonomics makes massive u-turn on economic growth projections from 2.3 to 1.5pc just like PL, EU Commission, and IMF had said. Just after budget speech, Karmenu Vella, Edward Scicluna and Charles Mangion said growth projections were over the top. They are proven right."

#fenechonomics makes massive u-turn on economic growth projections. From 2.3 to 1.5pc. Just like @PL_Malta, @EU_Commission and #IMF had said — Joseph Muscat(@JosephMuscat_JM) June 11, 2012

Fenech was speaking at the end of a visit to Shield Security Consultants which benefitted from the government’s micro-invest scheme which aids small companies which employ less than 10 persons.

The finance minister noted that the tourism and manufacturing sectors are showing positive signs and this should contribute to an improved economic performance in the next few months. 

Fenech also commented that Malta's open economy remained vulnerable to the spillover effects of European economies, 50% of which he said were also in recession.

The finance minister also criticised Labour leader Joseph Muscat, saying the Opposition leader was "unable to read statistics" and that STM's drop in exports was down to international demand and not pertaining to government policies.

Fenech was taken to task by Muscat for blaming the recessionary slide on €22 million in losses by Enemalta due to the rise in the international price of oil, and the drop in STM's exports.

In real terms, Malta's GDP decreased by one per cent, with household consumption falling by 4.4% in the last quarter compared to the same quarter last year. There was a major fall in wholesale and retail trade, a broad category that also includes motor vehicle repairs, transport and storage, accommodation and food services, which fell by 20% in the fourth quarter 2011, and again by 7% in the first quarter of 2012.