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Network News • 10-01-2023

Will 2023 usher in a nationwide panacea?

Author: George Mangion - Senior Partner PKF Malta
Published on Malta Independent: 10th January 2023

An important and positive start for 2023 was the news that European stock markets started on a high note after a tumultuous 2022.

Not so rosy was the prediction by IMF chief Georgieva, as she warns that a third of the global economy faces recession in 2023. As Head of the International Monetary Fund, she forecasted one-third of the world economy will be in recession. But it is not all doom and gloom. She thinks the US may avoid a recession, but half of the 27-nation EU will be in recession in 2023 as the bloc is "very severely hit" by the Ukraine conflict.

Back home, Prime Minister Robert Abela, in his New Year's Eve message, proclaimed that his government's primary objective has been to guarantee "peace of mind that our country is moving in the right direction", arguing that this policy was being met.

He has repeatedly described life in Malta as "serene", with people who live here enjoying "peace of mind". He spoke of the healthy economy and positive forecasts by the international rating agencies. Fitch is projecting a GDP growth of 3.4% next year while the EC forecasts a more subdued rate of 2.8%.

Listening to him, warms your heart. He is full of positive posturing and augurs that Malta is using its economic growth to ensure that every citizen will be able to live a better life, in a caring society and in a more beautiful country that offers the best quality of life.

As a pompous conclusion and with a touch of hubris, he emphasised that our country's economic success must go hand in hand with social progress and increased civil rights. An ebullient politician, he insisted that Malta's economic performance was among the very best having invested heavily during pandemic years to weather the storm. Understandably, Abela avoided the thorny subject of cost-of-living increases, low investment in renewables, climate change and shortage of skilled workers. The dark horse of galloping inflation did not sour his lips.

Commentators in the media ask if, having been blessed with so much, why do we remain determined to serially underachieve. In a small economy like ours, we need to keep our gun powder dry and set a higher GDP growth target, if only to pay back the €2bn sunk in pandemic funding.

On the problems of low-income cohorts, their trajectory seems to be escalating; one may ask is there a solution in sight to lift persons from poverty traps? After a number of highbrow economists hailed Malta's success to the skies, yet probity and honesty calls for structural economic challenges to be addressed before they become acute. Meanwhile, in 2023, the government will likely have to take even tougher decisions on Air Malta while finding enough capital to fund a downsizing policy.

The elephant in the room is the fact that the majority of public agencies are run by politically-appointed chairpersons and board of directors, some whose qualification for the job is nothing more than a blind allegiance to Castille.

To succeed in 2023 and beyond, it has become a cliche that we need a root and branch overhaul of politics and corporate governance. Obviously, coming out of a pandemic, one expects tough competition and we need to redefine the critical success factors that make us attractive in the eyes of potential foreign investors.

What are the flies in the ointment? A sober analysis reveals expected future changes in international tax regimes, the challenge by the EU to Malta's practice of selling passports and an ageing population with an acute shortage of skilled and professional workers. Another kerfuffle is the national policy of over reliance on property development and a rags-to-riches race to build over ODZ land.  

Denying what is happening in and around Malta is a national pastime. Ask any economist about sticking to the status quo and the straight answer is that taking an ostrich view is like being locked into a circular loop of assumed anger or moral capitulation. It has become a cliche among readers saying Malta is publicly and visibly corrupt, effectively immune to accountability and to a significant degree out of control. The man in the street is becoming immune to stories of an insatiable desire for wealth, sleaze and nepotism. All are tainting the reputation of our country and getting us to look closer to the Mezzogiorno.

Non salutary reports of nepotism by politicians appointing nieces and family members as persons of trust with astronomical salaries continue to feature. Such disclosures are revealed by a diligent media which proclaims from the rooftops an undulating wave of impunity. Who cares anymore about the stream of direct orders (millions of euros annually), jobs for girlfriends and family and a hole worth €20m in the MTA's budget?

The government and its cronies have long given up even trying to defend themselves. Moving on, it is no surprise, that an EY study discovered how over 70% of youth would rather live elsewhere, with environmental issues and excessive construction among their main concerns.

Naturally, nothing placates better than when the hegemony gives them panem et circenses, particularly embellished with spectacular fireworks at the end-of-year celebrations in Mellieha (the tourism minister's electorate seat). Quoting various studies, they confirm how expectations and anxieties might have changed due to the pandemic, yet this year both employers and employees are encouraged to dedicate time and effort to readapt in a sustainable manner.

Misco's new survey talks of 79% of employees have experienced mental health issues such as stress and anxiety related to their work.

The figure represents an increase of 16 percentage points, up from 63% in the 2021 survey. Another study, conducted by US analytics company Gallup in more than 120 countries, found that a quarter of Maltese respondents surveyed said they had experienced anger a day before being interviewed. Monitoring joy, the Maltese family came in at the lower end of the EU list, ranking second bottom, only ahead of Portugal, whose citizens experienced the lowest level of enjoyment.

In conclusion, let us rely on the prime minister's portentous economic forecast for 2023 and beyond. It is tempting not to lock horns with Abela's brave prognosis for the future. Realists say that achieving his prophecy is not an easy task, given the current mindset at Castille of "plus ca change".

Author: George Mangion - Senior Partner PKF Malta
Published on Malta Independent: 10th January 2023
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