Negative GDP for second quarter running

For the second quarter running, Malta’s Gross Domestic Product has registered negative growth. The National Statistics Office yesterday reported that Malta’s GDP in real terms for this year’s third quarter had declined by 1.3 per cent to Lm356.3 million. Over Q2 this year, meanwhile, real GDP was down by 0.6 per cent falling to Lm347.2 million.

Meanwhile, in the third quarter this year, Gross Domestic Product at factor cost increased by Lm9.9 million or 2.8 per cent to Lm356.5 million over the same quarter last year. The GDP at market prices was also up by Lm16.3 million or 4.1 per cent to Lm417.3 million. However, the Gross National Product (GNP) increased nominally by Lm10.7 million or 2.7 per cent to Lm414.6 million from Lm403.9 million last year. At Lm354.1 million, real GNP was also down by 2.7 per cent.

The NSO also reports that economic activity as a whole took a downturn as a result of lower exports from the electronic manufacturing sub-sector, while the manufacturing sector as a whole had dropped by 28.3 per cent.

In fact, given that one electronics manufacturer in particular constitutes a sizeable portion of Malta’s GDP, it must be noted that if that element were removed from the balance sheets, the GDP for the past two quarters would have found itself in the black.

In the third quarter this year, economic activity was affected by a downturn in exports, mainly resulting from a drop in exports by the electronics-manufacturing sub-sector, when compared to the high exports level registered in the same quarter last year. Sustained lower international demand for the output of the electronics sub-sector influenced the overall performance of the manufacturing sector, which in turn pulled down overall real GDP growth. However, all the other sectors, except for property income, registered a positive contribution towards the GDP, superseding this dampening effect and increasing the GDP at current market prices.

Imports of goods and services declined by almost Lm90.0 million or around 20 per cent when compared to the same quarter last year. This again was largely due to a substantial drop in the importation of industrial supplies.

As in the second quarter, the above-average growth in Gross Fixed Capital Formation made by the electronics-manufacturing sub-sector last year was not repeated this year. Investments in machinery in fact returned to their 1999 levels.

Meanwhile, In the third quarter this year, consumer expenditure continued to pick up in both nominal and real terms.

General government current expenditure increased considerably, mainly due to the salary increases given to government employees this year.

Stock levels declined due to the negative circumstances affecting some key export-oriented firms.

Sectoral performance

Agriculture and Fishing

In the third quarter this year, the contribution of the Agriculture and Fishing sector to the GDP increased over the same quarter last year by Lm0.8 million to Lm8.7 million. Within this sector, employment income increased marginally whilst the sector’s profitability increased by Lm0.7 million to Lm7.6 million. Increases in the value of fruits and vegetables sold through the organised markets contributed significantly to this sector’s growth.
Construction and Quarrying
The Construction and Quarrying industry continued with its slow recovery and improved its relative contribution to the GDP to 2.7 per cent from 2.5 per cent in the same quarter last year. The value added for this industry during the third quarter stood at Lm9.8 million, an increase of Lm1.1 million. Overall both components of value added, employment income and profits, showed increases of 11.9 per cent and 12.9 per cent respectively.

Manufacturing

The manufacturing sector’s nominal contribution to the GDP decreased by Lm11.5 million or 13.3 per cent to Lm74.9 million from Lm86.4 million last year. Reported profits by this sector declined by 28.3 per cent, whilst employment income increased by 2.3 per cent. In this quarter, the value added of the electronics sub-sector declined substantially compared to the same quarter last year. As a result, the improvement registered in the other sub-sectors within the manufacturing sector was completely reversed. The other sub-sectors increased their nominal contribution to the GDP by Lm4.3 million or 7.0 per cent, with the profits component being stronger and increasing by 9.4 per cent, whilst employment income increased by 5.5 per cent over the same quarter last year.

Transport and Communications

The contribution of the Transport and Communications sector to the GDP went up by Lm2.9 million or 9.8 per cent to Lm29.1 million. Within this sector, income from employment increased by 13.1 per cent or Lm1.8 million to Lm15.2 million, mainly due to the increase in the number of wage and salary earners. This sector’s profit component also increased by Lm0.9 million or 6.4 per cent to Lm14.0 million when compared to Lm13.0 million last year. The main contributor to this increase in profits was the air transport sector. At 8.2 per cent, this sub-sector’s relative contribution to the GDP increased when compared to 7.7 per cent last year.

Wholesale and Retail

The overall performance of the Wholesale and Retail sector improved by Lm2.3 million or 6.2 per cent to Lm39.1 million from Lm36.8 million in the same period last year. This improvement was largely the result of an increase in the profits earned by this sector, which were 8.3 per cent higher than last year. This increase was driven by the growth in the sales of the locally-oriented manufacturing and non-manufacturing sectors. Employment income remained practically at the previous year’s level of Lm9.9 million. This sector’s relative share of the GDP rose to 11.0 per cent during the quarter from 10.6 per cent last year.

Insurance, Banking and Real Estate

The contribution of the Insurance, Banking and Real Estate sector to the GDP went up by Lm6.0 million or 22.5 per cent to Lm32.4 million. Within this sector, income from employment increased by 1.4 per cent or Lm0.2 million to Lm11.9 million. This sector’s profit component also increased by Lm5.8 million or 39.5 per cent to Lm20.4 million when compared to Lm14.6 million last year, implying that the decrease in profits suffered by the insurance and real estate sectors were more than offset by the banking sector. At 9.1 per cent, this sector’s relative contribution to the GDP increased when compared to 7.6 per cent last year.

Government Enterprises

The contribution to gross value added by the Government Enterprises sector increased by Lm1.2 million or 4.7 per cent to Lm26.7 million from Lm25.5 million during the same quarter last year. Small increases were registered in both employment income (+ Lm0.8 million) and profits (+ Lm0.4 million). Within this sector, increases in employment income were registered at several public sector companies and authorities. As a result, this sector’s relative contribution to the GDP edged up to 7.5 per cent from 7.4 per cent last year.

Public Administration

With an increase of Lm7.2 million or 14.8 per cent, the Public Administration sector, which includes government entities, registered the largest growth in nominal terms. Its share of the GDP went up from 14.1 per cent to 15.7 per cent in quarter three this year. This increase was largely due to higher wages and salaries for all civil servants as a result of the new collective agreement which came into force this year, and, to a lesser extent, to one-off arrears paid to University of Malta employees in line with their revision of salaries.

Property Income

A drop in interest earnings from local bank deposits and on government loans resulted in a 3.8 per cent drop in the Property Income’s contribution to the GDP. Its relative share of the GDP decreased marginally to 11.0 per cent from 11.8 per cent last year.

Private Services

The Private Services sector’s overall performance improved by Lm1.8 million or 4.7 per cent to Lm40.6 million from Lm38.8 million last year. This may be largely attributed to widely-spread minor increases in the profitability components of this sector – higher by Lm1.0 million over the same period last year – of 7.7 per cent. Employment income also registered an increase of Lm0.8 million or 3.2 per cent to Lm26.3 million from Lm25.5 million last year. This sector’s relative contribution to the GDP has risen by 0.2 per cent to 11.4 per cent this year.

Expenditure Aggregates

In the third quarter this year total final expenditure at current market prices went down by Lm73.4 million or 8.6 per cent to Lm778.9 million. In real terms this decline amounted to Lm52.1 million or 7.2 per cent. This is mainly attributable to a drop of 16.7 per cent in exports of goods and services to the tune of Lm73.2 million at current market prices. In real terms, this amounted to Lm38.4 million.

Imports of goods and services declined to Lm361.6 million from Lm451.3 million last year. In real terms, imports dropped by Lm50.6 million to Lm312.7 million.

Expenditure on Gross Fixed Capital Formation decreased nominally by Lm15.4 million or 14.8 per cent to Lm88.2 million from Lm103.6 million last year. The fall in Gross Fixed Capital Formation is attributable to the decline in investment in machinery. In fact, when compared to the same quarter last year, the increase of 5.7 per cent in construction was entirely wiped out by the drop in investment in machinery of Lm17.0 million, or 22.8 per cent. In real terms, gross fixed capital formation decreased by 17.7 per cent to Lm78.4 million from Lm95.2 million last year.

In the third quarter this year, consumption expenditure nominally increased by Lm21.7 million or 8.5 per cent to Lm276.7 million from Lm255.0 million a year earlier. At constant 1995 prices consumer expenditure was up by Lm11.5 million or 5.1 per cent to Lm237.9 million from Lm226.4 million last year.

The increase registered in private consumers’ expenditure during the quarter was spread among various categories of expenditure. In particular, moderate increases were registered in expenditure outlays on food, beverages and tobacco, recreation, entertainment, education and cultural services. Furthermore, the developments in the telecommunications market contributed significantly to higher personal expenditure outlays on communication equipment and services.

Government expenditure on goods and services increased from Lm68.7 million to Lm81.1 million or 18.0 per cent. This was mainly due to a substantial increase in expenditure of 37.6 per cent on treasury pensions, a 24.1 per cent increase in expenditure by government entities, and a 14.3 per cent increase in expenditure by government departments. In real terms, government consumption expenditure increased by Lm4.4 million, or 7.4 per cent to Lm64.2 million from Lm59.8 million in the same quarter last year.