Are you looking for expert insights, timely updates, and valuable resources? Subscribe to our newsletter today!
Guest Speakers:
In the webinar entitled “You win some you lose some: reshaping the local economy”, the four panelists discussed the impact of COVID-19 on the local economy and opportunities for development of the economy after the pandemic.
What was the experience that you went through as a result of COVID-19? What was the effect of the measures put in place by government and businesses as a response to the pandemic?
Tony Zahra explained the negative effect of COVID-19 on the hotels and restaurant industry. He explained how a €2.1 billion industry went from a situation of high income to zero income.
Government assistance was imperative, as the industry continued to incur costs, but this was not met by any form of income. The government’s first action was that of providing assistance to employees through wage supplements to employers. This helped to eliminate the negative psychological effect of people losing their jobs.
Other measures were enacted by banks and regulatory authorities through moratoriums on loans. Additionally, authorities postponed VAT and NI payments, and this continued to help businesses in terms of liquidity.
The tourism industry is vital to the Maltese economy and as the airport is reopening, we can see that tourism arrivals are steadily increasing in these summer months, despite being lower than last year’s figures. In fact, tourist arrivals in July amounted to 27% of last year’s July figure. 40% in August and 50% in September were projected.
Anthony Grech added that despite experiencing a positive shock in the supermarket sector, the Group’s manufacturing and food processing factories experienced a negative impact. This is because these factories provide supplies to the majority of restaurants in Malta, all of which had to close during the pandemic.
E-commerce: Has there been a reduction in e-commerce in the last few weeks?
Anthony Grech explained that a slight reduction in e-commerce was experienced in recent weeks due to the relaxation of government measures. This was mainly brought about because people are now going out and spending money physically in the stores. However, in comparison to last year’s figures, e-commerce has increased. Prior to the pandemic, e-commerce constituted about 5% of turnover and it now stands at around 10-12%.
The latest economic forecasts show a significant contraction in the local economy for 2020, with a 6% rebound in 2021. Is this attainable? Can Malta afford this?
Gordon Cordina suggested that the macroeconomic figures relating to the Maltese economy are not very worrying, relative to other countries. He added that the most optimistic projections for the Maltese economy predict that the country will return to its 2019 level of economic growth by 2022.
In terms of affordability, the Maltese economy might experience a higher debt-to-GDP ratio in the next two years, at around 55-60%, but this is still lower than pre-pandemic figures.
This brings us to question whether a reduced number of tourist arrivals will be the new normal. As a result, the Maltese economy should start focusing on the quality of tourists rather than quantity. Both Tony Zahra and Gordon Cordina highlighted the importance of focusing on the quality of tourists as this results in higher value added without putting capacity under immense pressure. Due to the country’s limited size, attracting an increasing number of tourists every year is unsustainable.
Significant investment in infrastructure is being planned by Malta Industrial Parks. Is this being met by significant demand that contributes to higher added value?
Brian Camilleri described the fact that Malta Enterprise micro-targets companies of a smaller size (due to the country’s size restriction) that have the opportunity to expand in Malta. Their aim is to attract businesses that can offer jobs that will afford a better quality of life for their employees.
There is significant demand to set up businesses in the Maltese economy despite the pandemic. In fact, Malta Enterprise was in talks with a number of investors who are still willing to establish themselves in Malta once COVID-19 is over.
Going forward, do you foresee any new measures by government to support or incentivise increases in productivity, or do you think that now is the time for businesses to act independently of government?
Tony Zahra explained that the industrial policy should be dictated by the national interest. In addition to this, Gordon Cordina stated that liquidity is abundant in this country and must be used by businesses to attract the best talent to suit our industry. He also explained that the market economy can never be left to its own devices completely, as some essential services provided by government still remain necessary.
All panelists emphasised the importance of innovation in today’s economy, and stated that the pandemic provided an opportunity for businesses to focus on innovation and higher productivity. This will inevitably have a long-lasting effect on the local economy in future years.