`Our Economy is as resiliant as we can make it` Vince Farrugia speaks to Times Editor Joana Ripard

'Considering the eurozone is likely to go into recession in 2012, what measures should the government and stakeholders take to ensure economic growth and job creation next year?' – When the global economic and financial recession first hit Malta in 2009 Malta was saved from greater economic damage as a result of a combination of four elements. In the pre-recession period when the World Economy was awash with speculative money which was pouring in those economies that did not block the flood waters like Ireland, Greece, Portugal and Spain, Malta had in force monetary and legislative firewalls that prevented this kind of money to reach us. In the property market the only speculative moneys that moved in where the substantial funds owned by Maltese who previously, fraudulently,  evaded  income and other taxation  and foreign exchange controls, and which funds  were then allowed in under that horrible Tax, and I say,  fraud, Amnesty. Otherwise the fact that we managed relatively well with our own local funds ensured that while we were not subjected to exceptional international pressure we could also manoeuvre out of the recession relatively unscathed.

And this is precisely the second element. Our size and our control on our macroeconomic imbalances both internal (government financial deficit) and external (international, the balance of payments current account) protects us from the uncontrolled reactions of the global money market. The third element is the way Government has been managing the economy. In brief this is a steering away from the pressures of the international money market, high pressure to turn the economy through various incentives towards new forms of investments based on the knowledge economy. The incentives package brought forth the quicker emergence of an economy based on transhipment, light knowledge based manufacturing, tourism all-year-round based on niche markets, specialised service enterprises like e-gaming and professional back office  and enterprise support quality services, financial services and quality conventions and conferences,  as well as international trading and logistics, warehousing and logistic.

The entrepreneurs operating on the local economy and depending on local private and public sector consumption and the derived demand of the enterprises with an international clientele are increasingly being supported together with exporters of goods and services with assistance programmes in favour of renovation, restructuring and resizing. I believe that this strategy should be intensified now that there is a threat of another round of recession. We need to concentrate more on the restructuring of our enterprises in favour of more innovation. We also need to manage and control our Banks better. In this regard I continue to stress that access to finance remains the major  hurdle of Maltese enterprise as they seek to grow and restructure.. The loan guarantee schemes for which GRTU has worked so hard are essential. But Banks remain loaded with excess liquidity as the Maltese level of savings remains high but a big chunk of this liquidity is moving, and very fast, abroad to the detriment of Maltese entrepreneurship and to the absolute importance of rapidly increasing our national output. Finally our important fourth element: our ability to manage our National Accounts. We can as a result of our size identify the problems faced by exporters, tourism operators and others and indicate in a short period of time effective remedies that can be implemented fast enough to keep improving our competitiveness and keep our international macroeconomic imbalances in check . We can also manage our government Financial Budget tightly enough to ensure that our Balanced Budget EU directed strategy is achieved even earlier than planned.

Government should also speed up its capital investment programme. Government should not wait for the second half of the year to really start spending as the delay may cost us dearly if the international situation worsens and finds us unprepared with a readily planned capital investment expenditure. This expenditure will  balance any shortfalls in private expenditure by increased public expenditure not in useless current expense but in worthwhile investment projects.  The last thing Government in 2012 should not do is to panic and submit to negativism and to panicky austerity measures. Politicians will do the country honour if they stop the ugly scenes of infighting that destabilise unnecessarily the local economy and cause strain and fear among consumers. Consumer confidence is important. As for stakeholders, I say that we have enough fora and  where to present arguments and solutions to actual and not perceived problems. We at GRTU are proud of the volume of solutions we constantly push forward. We can shout and bang in camera, but let us all keep the people out there concentrated on improving overall productivity and keep their standard consumption going. Our economy is as resilient as we can make it. We can face the challenge if we all really want to.