The economy’s strong performance in the first half of the year and its resilience in the third quarter, judging by the reduction in the jobless figures for September, will probably ward off the possibility of a recession.
This does not mean that the economy will be immune to outside pressures. Indeed the prospects for the last quarter of the year are anything but good. Exports are on a downward trend and large manufacturing firms have had to scale down their work force or opt for a four-day week.
These are only the first signs of what we can expect to witness in the months to come as the global recession sucks in one country after another.
With lower consumption in the United States, with the British economy in recession and Europe moving along sluggishly, Malta’s export industry including tourism is in for a very rough ride.
In all this turmoil and uncertainty the least the commercial community expected was an internal shock of government’s own making. The increase in the utility tariffs is one such shock that the country could have done without, at least for the next 12 months.
It is positive that capping will be phased out over three years giving industries the chance to cushion the change. It is also encouraging to note that very large industrial consumers will have their projected increases topped at 40 per cent of what they used to pay to safeguard jobs.
But these two mitigating factors cannot hide the reality that utility bills for the commercial sector will rise across the board, way above the current bills with the 95 per cent surcharge.
Tonio Fenech may be right in saying that government has limited options to prevent the impact of world recession on export companies. But the new utility tariffs are a jolt these companies could have done without.
Furthermore, the higher utility bills will also impact the economic operators that ply their trade in the domestic market. Government has not calculated the loss in purchasing power for families owing to the increased bills households will be paying.
The way out of a slowdown is increased consumption. Coupled with the already uncertain environment that surrounds the jobs of many people, the tariffs will only serve to curb consumption.
What we find hard to understand is why government has refused to conduct a social and economic impact assessment of the proposed tariffs. We would expect government’s financial advisors to have drawn up the prospective scenarios of how the higher bills will impact household spending and how this will translate itself into more or less VAT earnings for government.
We fail to understand why government has not analysed the impact of the tariffs on economic growth. If the analysis has been done then we expect it to be published.
The argument for greater government intervention into the economy at this point in time is not borne out of an ideological stance. Common sense dictates that government spending is required to restore confidence and rev up investment that creates jobs. Subsidies may not be a productive way of kick starting the economy but in Tonio Fenech’s words they are a momentary pain killer, even if just up to a year ago they were anything but a pain killer for a government that was spendthrift with public funds.
While long term planning and productive investment is required we could still very well do with a momentary pain killer that sees us through the next 12 months.
