Imports, exports down while current account balance improves

The National Statistics Office has registered what it describes as a notable improvement in Malta’s international economic and financial transactions over this year’s first quarter.

The current account balance over the first three months of the year saw an improvement of Lm20.6 million, from a net deficit of Lm34 million during Q1 2001 to a net deficit of Lm13.4 million in Q1 2002.

Visible trade gap

A generous contraction in the visible trade gap of Lm20.7 million, from a net negative balance of Lm53.7 million during Q1 2001 to a visible trade gap of Lm33.1 million during the same period this year.

Notwithstanding a decline in the country’s total export earnings of Lm25.6 million, from Lm245.1 million during Q1 2001 to Lm219.5 million over Q1 2002, the total imports bill shrunk by a notable Lm46.3 million, from Lm298.8 million during the first quarter of last year to Lm252.6 million during the comparable period this year.

This decline was generated mainly by a decrease in the imports of semi-finished industrial goods as well as by a decline in the expenditure on capital goods and fuel products imported from abroad.

In the same direction, albeit to a smaller extent, the income account improved by Lm2.8 million, from a net surplus of Lm10.9 million during the first quarter of 2001 to one of Lm13.7 million during the same period this year. Also, the services account improved by Lm2.5 million, from a net surplus of Lm9.2 million during the first quarter of 2001 to one of Lm11.7 million during the same quarter this year. Indeed, the services account was favourably affected by a decline in the net negative balances of both the transport account and the other services account of the statement.

As a result of the lower imports bill recorded during the period under review, the net deficit in the transport account declined by Lm4.4 million, from a net negative balance of Lm12.6 million during the first three months of 2001 to one of Lm8.2 million during the period under review. Also, the net deficit in the other services account contracted by Lm3.6 million, from a net negative balance of Lm7.9 million during the March 2001 quarter to one of Lm4.3 million during the same quarter this year.

Travel

On the other hand, the net surplus in the travel account deteriorated by Lm5.5 million, from a net positive balance of Lm29.7 million during the March 2001 quarter to one of Lm24.2 million during the period under review. This was contributed by the combined outcome of a decline in earnings from incoming tourism of Lm4.8 million together with a slight increase in expenditure by Maltese travellers going abroad of Lm0.7 million. Additionally, the net deficit in the current transfers account rose by Lm5.3 million, from a net negative balance of Lm0.4 million during the March 2001 quarter to a net deficit of Lm5.7 million during the period under consideration.

As regards the capital and financial part of the statement, the account was characterised by a shift of Lm34.2 million, from net inflows of Lm25.9 million during the March 2001 quarter to net outflows of Lm8.4 million during the same period this year. This has emanated essentially in the financial account of the statement with a shift of Lm34.6 million, from net inflows of Lm25.9 million during the January to March 2001 quarter to net outflows of Lm8.7 million during the same period in 2002.

Direct investment

The direct investment account registered a slight decline in net outflows of Lm0.3 million, from net outflows of Lm169.3 million during the first three months of 2001 to net outflows of Lm169 million during the comparable period in 2002. Direct investment abroad rose by Lm4 million, from net outflows of Lm0.4 million during the March 2001 quarter to net outflows of Lm4.5 million during the relative period in 2002; whereas direct investment in Malta improved slightly by Lm4.4 million, from net outflows of Lm168.9 million during the first quarter of 2001 to net outflows of Lm164.5 million during the same period in 2002.

The portfolio investment account was characterised by an increase in net inflows of Lm251 million, from net inflows of Lm15.5 million during the January to March 2001 period to net inflows of Lm266.5 million during corresponding quarter in 2002. On the other hand, the other investment account shifted by Lm247.6 million, from net inflows of Lm166.9 million during the March 2001 quarter to net outflows of Lm80.8 million during the same period in 2002.

In a mirror reflection to the shifts in the current and financial transactions of the statement, the (official) reserve assets of the country rose by Lm25.4 million as opposed to a decline of Lm12.9 million during the same period in 2001.

Transactions with the EU - 2000

A summary statement on the international economic and financial transactions of Malta with the European Union (EU) for the year 2000 discloses a notable deterioration in the current account balance of Lm269.5 million, from a net deficit of Lm167.5 million during 1999 to one of Lm437 million during 2000.

Generating this outcome was essentially an across-the-board deterioration in all the net balances of the accounts making up the compilation; the most pronounced of all emanating from the goods account and the income account of the statement. Indeed, the visible trade gap in the goods account widened by a significant Lm165.3 million, from a net negative balance of Lm287.2 million during 1999 to one of Lm452.5 million during the year under review. In fact, while total exports to the EU declined by Lm24.4 million, from Lm388.3 million during 1999 to Lm363.9 million during 2000; total imports from the 15-member union increased by Lm140.9 million, from Lm675.5 million during 1999 to Lm816.4 million during the period under consideration. This was effectively driven by a re-direction of EU-originating merchandise imports that underwent processing locally and (then) exported to geographical locations other than the EU.

Likewise, the net balance in the income account worsened by Lm83.6 million, from a net surplus of Lm13.8 million during 1999 to a net deficit of Lm69.8 million during 2000. Indeed, this was contributed by a significant rise in reinvested earnings that are owed to direct investing entities coming from the EU and which, therefore, affected adversely the income account of the statement with the extent of funds put back into their enterprises.

In the same direction, the net balance in the services account shrunk by Lm16.6 million, from a net positive balance of Lm94.1 million during 1999 to one of Lm77.6 million during the year under consideration. Fuelled by an increase in payments to EU-registered freight carriers as well as by a decline in revenue from the transportation of passengers coming from the EU, the net deficit in the transport account increased by Lm19 million. Also, the net surplus in the travel account declined marginally by Lm1.6 million; whereas the net negative balance in the other services account contracted favourably by a noticeable Lm4.1 million.

Additionally, net balance in the current transfers account deteriorated by Lm4.1, from a net surplus of Lm11.8 million during 1999 to one of Lm7.8 million during 2000.

In sharp contrast to the above, the balance of payments position of Malta with the rest of the world improved by a remarkable Lm109.7 million, from a net surplus of Lm118.2 million during 1999 to one of Lm227.9 million during the period under consideration.

The net surplus in the goods account expanded by a notable Lm122.8 million, from a net positive balance of Lm58.5 million during 1999 to one of Lm181.4 million during 2000; whereas net deficit in the income account withdrew by Lm17.6 million, from a net negative balance of Lm0.9 million during 1999 to a net surplus of Lm16.7 million during the period under review.

On the other hand, the net balance in the services account shrunk by a noticeable Lm28.9 million, from a net surplus of Lm55.4 million during 1999 to one of Lm26.5 million during 2000; whereas that in the current transfers account decreased by Lm1.8 million, from a net surplus of Lm5.2 million during 1999 to one of Lm3.4 million during the period under review.