The Economy Lino Briguglio

The Economy Lino Briguglio I. Introduction the structure and performance of the Maltese economy during the period he Maltese economy is one of the 1960-1991. Following this introduction, a T smallest in the world. In 1991, the brief account of Malta's development Maltese GNP was approximately planning, and its results, is given. Sections US$25,000 million and the Maltese three and four give some details on population was just under 360,000, cyclical and structural changes over time. occupying a land area of around 320 The fifth section discusses changes in square kilometres. expenditure patterns, while section six In terms of GNP per capita, however, deals with changes pertaining to the Malta is not on the low side by Maltese balance of payments. Section international comparisons. Although seven describes the most important usually classified as a developing country, weaknesses faced by the Maltese economy its average 1991 per capita GNP, today, and section eight concludes the amounted to approximately US$7 ,000, paper. which is higher than most third world countries. The World Bank, in its 1991 World Development Report classified the II. Maltese Development Maltese economy as an upper middle Planning income one. As is well known, GNP per capita has a The most important change that has - '\ number of shortcomings as an indicator of occurred in the Maltese economy during development, and sometimes other the past 30 years relates to the indicators are utilised for making expansion of the manufacturing sector and development comparisons across nations. the phasing out of the British forces bases One such indicator is the percentage in Malta. contributed by the manufacturing sector to Up to the fifties, the Maltese economy GDP (see Table 1). In Malta this amounts relied heavily on British military to just under 30o/o, which compares well expenditure (up to 1964 Malta was a with the manufacturing percentage British colony). Exports of merchandize pertaining to developed countries. was minimal, and very little regard was Some social and educational indicators given to international competitiveness. suggest that Malta is more akin to Every year, the Maltese government drew industrial market economies than to third up a budget, asking for funds from Britain world countries. Literacy rates, school to balance its administrative accounts and enrolment rates, average life expectancy, to create employment in British military the number of hospital beds and the establishments in Malta. number of physicians per head of During the second half of the fifties, it population are very similar to the rates became manifestly obvious that changes in found in Western European countries the British defence policies were going to (Briguglio 1988). result in massive rundowns of employment This paper gives a very brief overview of with the British services in Malta, and the 233 Malta's Central Bank in Valletta, with the suburb of Floriana and part of the Grand Harbour in the background 234 need was felt to implement a coordinated and reliance on international development plan to diversify Malta's competitiveness has been emphasised more economy (see Balogh and Seers, 1955, than ever due to the fact that as full EC Stolper, 1964 and British Government, member, Malta would eventually have to 1957, 1963). remove all import barriers on goods, Between 1959 and 1986, six development services, capital and labour coming from plans were launched (see Maltese and going to the other members of the Government, 1967, 1972, and Development community. Plans). Although during this time Malta The development process in Malta was had governments of different ideologies, beset by a series of difficulties, which were the basic objective of successive plans was not all of Malta's own making. These essentially the same, namely that of included the successive and sometimes making Malta a viable economic unit, unexpected decreases in the British defence which by its own efforts would provide expenditures during the sixties, the jobs for those who sought them. international energy crisis and To achieve this aim, steps were taken to unprecedented inflationary pressures during increase the share of manufacturing, the seventies, and the international tourism and agriculture in the domestic recession during the early eighties. product. Since Malta's internal market is A satisfactory measure of success has very small, industrial expansion had to be however been achieved, and this is sustained through increased reliance on the evidenced by the expansion of the t'l>e export market, and therefore the manufacturing and the services sectors and importance of competitiveness for attaining the phasing out of dependence on British economic objectives was always stressed. military service, the growth in the number All plans and strategies were based on the of the gainfully occupied persons and the need for adapting attitudes and methods of rise in real per capita national income. production to the changing structure of the Maltese economy. The major differences between the Ill. Cyclical Changes planning and strategic approaches under different governments were related to the During the period under consideration, role of the state in directly productive the Maltese economy experienced a cyclical activities. The Nationalist governments pattern of change. (1962-71) believed that state organs should The economy grew at a very slow rate only take a supportive role in such during the first half of the sixties. During activities, leaving the private sector to take this sub-period, emigration and business initiatives according to market unemployment reached very high rates. forces. The Labour governments (1971-87) The trend was however reversed during the on the other hand, tended to base their second half of the sixties, a sub-period economic policy on the tenet that the state characterised by very fast growth rates in should participate directly, especially where GDP and employment. the private sector failed to take the The economy slowed down again during th~ firct h~ lf nf th13 cl3u~nt1,:~oco A lthnnoh initiative. 0..&&""' .I.&.&.UO.. &.1.-A.&. '-'& 0..&.1. ..... <J'"'"f"".I.&"'.I.""'Ue ..J.lL.I.'-A.I.-'-&Q.I..I. Since 1'987, the year the Nationalist party between 1970 and 1974 GDP tended to (conservative with liberal economic grow, the number of persons employed did orientation) was elected in government, no not grow significantly, and had plan was published as such, but the market employment not been created in oriented strategy of the government was government labour corps, the number of clearly expressed. Malta is at present persons employed would have actually seeking to join the European Community, decreased. Again, this sub-period of 235 unsatisfactory economic performance was during the second half of the eighties and followed by fast growth rates in output early nineties could be attributable to and employment in the second half of the process of liberalisation introduced by the seventies. Nationalist government since 1987. There is Between 1982 and 1985 the Maltese considerable debate in Malta as to whether economy performed at its worst The rate or not economic liberalisation is beneficial of growth of GDP was a very slow one . to the Maltese economy, but it appears . · Employment decreased at a very rapid rate that it has so far given good results in - the fastest decline when all sub-periods terms of growth of GDP and employment are considered. Unemployment, on the other hand, increased and reached very high rates. Had the labour force not IV. Structural Changes decreased, the official unemployment figures would have been much higher. The patterns of change just described The economy picked up again after have been accompanied by changes in the 1985, and GDP in real terms grew at a rate composition of GDP. Table 2 presents data of about 60Jo per annum between 1986 and on the contribution of major sectors during 1991. Between 1988 and 1991 unemployed the period under consideration. averaged around 4%. It can be seen from this table that the The fluctuations in the Maltese ~conomy fastest growing sector was manufacturing, are reflected in the ups and downs of GDP which accounted for just under 17% in the and the rate of unemployment shown in early sixties and increased to about 33% Figures 1 and 2. Figure 1 gives the pattern during the late seventies. There was a of change of GDP compared to a 33 year decline in the percentage share of this trend and Figure 2 shows the ups and sector during the eighties. downs of unemployment and emigration. The manufacturing sector itself also The figures show graphically that the changed structurally during the past thirty economy performed at its best, in terms of years. The textile and clothing sub-sector rates of growth of GDP during the second has tended to increase its share up to the half of each decade. The most rapid seventies and to decline again during the increase in GDP occurred between 1975 eighties. The machinery sub-sector and 1979 and the lowest rates of expanded its relative shares between 1960 unemployment occurred during the second and 1990. On the other hand, the transport half of the seventies and the second half of equipment sub-sector (mainly representing the eighties. shiprepair and shipbuilding) has Probably the most important factors experienced a decline in its share of the which accounted for the satisfactory manufacturing sector. performance of the Maltese economy An important sector during the sixties during the second half of the sixties and of was the British military base. The data in the seventies were the so-called Table 2 shows that this sector reduced its construction boom during the sixties, and share of GDP from an average of 15% in the rapid increase in tourism during the the early sixties to zero during the eighties.

Load more