GDP growth of 5.9 per cent with EU accession - expert

By Matthew Vella

According to EcoMod President and Economic Professor Dr Ali Bayar, Malta’s accession to the European Union would prompt an additional growth of 5.87 per cent in gross domestic product, reversing a negative trend so far plaguing the Islands on and off since the early nineties.

At yesterday’s talk titled ‘Costs and Benefits of Membership or Non-membership’ organised by the Malta Business Bureau at Attard’s Corinthia Palace Hotel, Dr Bayar said EU membership would, over the medium to long term, help Malta reduce its structural deficit.

But his idea of how to reduce the bane of the Islands’ economy remains, at most, vague.

Dr Bayar mentioned the Stability and Growth Pact, famously dubbed ‘stupid’ by none other than EU President Romano Prodi, and how Malta would have to adhere to the three per cent budget ceiling later throughout its membership of the EU, or face penalties.

But with deficit control come reduced government expenditure and higher taxation, a massive contractionary effect to the economy.

Dr Bayar said the process of deficit reduction would inevitably open up supply channels to be filled by the private sector, taking on projects previously administered and carried out by the government. Dr Bayar said that strong policies and reforms are now what the government has to undertake in order to bring this change about.

In a sectoral analysis of EU membership, agriculture made a poor showing in the statistics, with a projected decrease of 1.6 per cent in production, followed by a decrease of five per cent in employment, would follow upon EU accession. In real terms, Dr Bayar is convinced the effects on production would cost less than Lm1 and 109 jobs.

There were splendid projections for the construction industry however, with the infrastructural projects Malta will have to commit to upon accession, bringing a production increase of nine per cent. Employment, meanwhile, was set to benefit by 6.56 per cent. Another predicted to make a good showing were electronics, with a production increase of 6.08 per cent.

The good news for Malta’s economy remains, as Dr Bayar explains, the additional GDP growth of just under six per cent. In the eventuality of non-accession, the GDP growth could only decrease, at 0.3 per cent, he said.

He presented his predictions against a background of a combined 6.45 per cent growth in additional GDP for accession countries, and a negligible 0.47 per growth for the European Union. The rest of the world will be sailing worryingly to a negative growth of 0.02 per cent.

The outcome of Bayar’s GDP promise stands to be tested. He quipped about the EU not being a ‘paradise’ and how nations had to find their feet within the Union’s market upon membership.

Brandishing Ireland’s economic miracle as an example, Dr Bayar stated the country’s GDP per capita shot up to well over 100 per cent since first joining the EU while Greece, Spain and Portugal had not experienced GDP reductions.

Malta’s integration within the EU would ultimately bring with it an interesting take on Labour’s partnership. Through access to the single market, Malta would be acquiring participation to hundreds of trade agreements signed between countries outside the EU and, indeed, with the EU itself.

"Malta will have added leverage for multilateral and bilateral trade agreements. There are very important conditions for leverage in such agreements and they could take time, be financially costly and a burden on human resources, and you ultimately need power to have leverage. This is something a small economy does not have."