Malta Central Bank Governor Blames Slow Pace Of Reform For Stalling Economic Growth

by Robert Lee, Tax-News.com, London

14 April 2005

Michael Bonello, the Governor of the Central Bank of Malta, has suggested that Malta has failed to fully capitalise on its accession to the European Union.

Writing in the Central Bank's annual report, Bonello stated that the jurisdiction has been slow to implement key economic reforms which, along with a cyclical downturn, has contributed to sluggish growth rates.

"There is evidence that the delay in implementing effective competitiveness-enhancing reforms is an important factor," he observed.

"This, together with the fact that the relationship between productivity and costs has tended to deteriorate compared to that in competitor countries, partly explains why Malta does not appear to be capitalising on the new opportunities to the same extent as most of the new EU Member States," Bonello added.

The Governor noted that an important cause, and effect, of the slow pace of growth of the Maltese economy is the relatively low proportion of GDP being allocated to investment, which is about 5% lower in Malta than in the other new member states.

Another important underlying factor of the economy's poor rates of growth according to Bonello is the relatively large fiscal deficit, which averaged 6.8% of GDP over the past five years.

The Bank foresees the economy growing at a faster pace during 2005, albeit below its potential growth rate.

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