Maltese Economy Set To Recover In 2002

by Robert Lee, Tax-News.com, London

19 April 2002

In his annual report last week, the Governer of the Malta Central Bank, Michael C. Bonello, said that the jurisdiction's economy had proved surprisingly strong during 2001, and predicted faster economic growth and recovery in the second half of this year.

In a statement to accompany the bank's annual report, Mr Bonello said that although the Maltese economy had clearly been affected by the dramatic events of 2001, it had shown a degree of resilience in the face of a global slowdown, in which both established and emerging economies lost momentum.

However, he stressed the importance of the 'fundamental reality of today's globalised economy', and drew attention to its implications for policy makers in Malta. The Central Bank chief explained that several factors, both international and domestic, could impact on the degree to which the region's economy recovers in 2002.

He observed that Malta is highly dependent on exports for its livelihood, and on imports to satisfy the needs of the population, that the economy is relatively small and depends on a few market niches. He also said that the jurisdiction's economic situation is by nature dualistic, with one productive sector fully exposed to international competition, and another sheltered by a combination of protectionist measures, public sector intervention, or monopolistic arrangements.

Mr Bonello stressed that although there is a strong possibility of an upturn in the economic cycle later in the year, policy makers must focus on enhancing Malta's reputation as an attractive location for international business.

Measures for the future should include further consolidation of the fiscal balance, the preservation of stability in both financial and exchange rate terms, and the implementation of structural reforms, according to the Central Bank Governor.

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