IMF report

IMF calls for decisive policy action, growth not as good as Maltese had thought. From New Europe weekly:

Noting that "growth so far this decade in Malta has trailed that of most other EU members, notwithstanding the recovery that began in 2005," the International Monetary Fund (IMF) recently shot down government's claim that economic growth has gained grounds, Malta media news reported. The IMF recommended "decisive policy actions to be taken to enable Malta to reap the full benefits of economic integration with the EU." These conclusions resonate perfectly Alfred Sant's consistent declarations that for Malta to be on the right track, it needs to increase its economic growth.

Parliamentary Secretary Tonio Fenech expressed satisfaction on behalf of the government at the findings of the IMF’s report. He told Malta media news that the IMF's recommendations do not mean that Malta did not have an economic growth, but that it needs to do more. He compared the IMF to a doctor - suggesting the cure to improve the economic situation. Fenech said that the findings of the report were in stark contrast to those which were made public two years ago. In the report, IMF experts commented that Malta had successfully negotiated the challenge of reducing the country's deficit to sustainable levels and that Malta's economy was not only in recovery, but that growth was gaining momentum.

Fenech was cited as saying by the press that the IMF pinpointed 2005 as the beginning of the economic recovery and that as a result of the work carried out in the past two years, Malta will begin to enjoy the benefits of EU membership. Based on the IMF's conclusion that Malta's growth was not sound enough during the last decade, the report by the directors of the Executive Board recommended that "moderation of public sector wages should continue in 2007-2010, also to avoid igniting demands for private sector wage increases." This means that because Malta has lagged behind in economic growth, the government should “moderate” public sector wages, Malta media news reported.

Once again, the IMF contradicts Maltese Prime Minister Lawrence Gonzi's discourse that the economy is growing and that now the citizens will be reaping the benefits. Fenech also said that while the IMF recognised that Malta had stopped to compete in the textile industry, the loss of jobs and productivity was made up for in other sectors such as back-office work, call centres, aviation maintenance, electronics, pharmaceuticals, financial services and IT.

The IMF, he said, acknowledged that Malta's long-term outlook was positive and that the economy had grown. He said that in the second quarter of 2007, gross domestic product (GDP) grew some 3.7 percent in real terms. This he said was up on last year's second quarter figures, which placed GDP growth at 3.3 percent. He said that economic growth was being stimulated from across the board and that income from the manufacturing service was up by four percent, financial services were up by eight percent and real estate up 12 percent. "The government concurs with these figures because they are reflected in the amount of money which we recoup through taxes. Another positive factor was that tourist arrivals were up by 12 percent," he was quoted as saying.

Another positive note made by the IMF was that Malta's inflation rate was well within the EU's 1995 Maastricht criteria. The IMF encouraged Malta to continue with driving down the deficit, pointing out that at current pace, it could even go down to below three percent by 2010. He also said that government research has shown that the country is well on the way to reaching its deficit reduction goals this year. The IMF also said that the government was wise to not devalue the lira and that the only way Malta could boost its competitiveness was by being productive.

Read the full text of the IMF Malta report here; IMF Malta page.