An Economic miracle sounds pretty nice….that is exactly what you would like your country to go through.
Due to my academic background and personal beliefs, I am particularly amused at the notion of an “economic miracle”. However, for our purposes we will vaguely define an “economic miracle” as a prolonged period of time during which a country’s economy performs significantly better than that of most other countries.
So…is it happening?
Those bolstering about an economic miracle point at the almost full employment, a booming tourism industry, busy restaurants, success in the financial services and the continued growth of the online gaming industries. On the other hand, sceptics argue that wages are low, poverty is still a reality, and infrastructure is not up to European standards.
Has Malta benefited from an economic miracle? Is it enjoying it right now?
That is exactly what this article is meant to discuss, ….and don’t worry you don’t need to be an economist to be able to follow.
There are several factors that determine the economic health and prosperity of a country: fiscal performance, distribution of income, private wealth and level of debt, employment and unemployment rates, long-term sustainability and even environmental exploitation. All of these issues merit to be discussed on their own, probably within their own dedicated article, but we have to start somewhere.
After all “Economic miracle” is not exactly a technical term so I shall kick off with what I would consider to be the basis of it all. Today we will start with a brief analysis of Malta’s economic performance focusing on GDP growth rate in real terms.
I was first inspired to examine this matter when a particular newspaper pundit claimed that Malta enjoyed “record growth rates” since joining the European Union. These “record growth rates” must have happened in a parallel universe, one where statistics and facts do not exist.
According to Tradingeconomics.com
“GDP Annual Growth Rate in Malta averaged 2.43 percent from 2001 until 2016”, and if you exclude the better performing latest 3 years you would find that between 2001 and 2012 Malta’s GDP grew at the miserably slow rate of 1.9%. This is way below the average real GDP growth rate enjoyed by the rest of the world which, according to indexmundi, was 3.6%. As a matter of fact during the last 16 years, Malta’s economy has grown at a slower pace than the World average for 9 out of 12 years, before it started to significantly and consistently outperform the rest of the World in 2013,
Malta’s economy hasn’t even performed particularly well compared to the rest of the E.U. At the end 2004 (this is the first year of Malta’s EU membership) Malta’s GDP per capita at PPP (purchasing power parity) was 80% of the average of the current 28 EU member states (the UK is still a member of the EU). By the end of 2012 this had gone up to 84% of the EU28 average, hence in the first 8 years Malta barely managed to outperform (+0.5%) the EU’s anaemic growth rate. It was only between 2013 and 2015 that Malta’s GDP per capita (at PPP) climbed to 89%.
To put this in perspective compare the ˜ 2% growth rate of Malta’s “EU membership-era” with the 10% average real GDP growth rate achieved between 1971 and 1981 or the 7% enjoyed between 1988 and 1992. While the latter “boom” was inflated by fiscal over-spending and a construction bubble; the economic performance of the last 12 years pales in comparison to either of these periods.
So if you believe that Malta has enjoyed any sort of economic miracle this century or record growth rates since joining the European Union, I would really like to know in which reality you live; because that’s definitely not the case in ours, not if you actually bother to check the statistics.
Malta’s economy has only been performing well since the second half of 2014, after 15 years of lethargy and 35 years of under-performance. Now…if the Maltese economy goes on to grow at 6 to 6.5% per annum over the next 5 years, like projected by Finance Minister Prof. Edward Scicluna, that would be a different story.If there is a Maltese Economic miracle we have certainly not been through it yet, and we are merely at the beginning of better things to come, especially if you’re a salaried worker as wage earners are the last to reap the fruits of economic growth.
Note: A reference to Malta’s over/under performance compared to the rest of the World was edited as during research we are conducting for another article we discovered that our previous statement was (slightly) incorrect.