Over a period of a week, two independently held surveys carried out for the European Commission indicated a strong sense of optimism that is pervading Maltese society, even in these testing times.
The first survey, the Eurobarometer, was held towards the end of February, just before significant restrictions to economic activity were introduced by the Maltese Government. Despite seeing a rise in the number of active cases, nearly a third of Maltese respondents expressed their belief that by 2022 the Maltese economy would bounce back above pandemic levels. This was the highest proportion around the EU, where on average, less than a quarter thought 2022 would mark the recovery for their country’s economy.
Nearly half of those interviewed in Malta felt that the country was going in the right direction. This contrasts with the EU average, with just a third of respondents feeling the same. Close to two-thirds of Maltese respondents argued that the state of the economy was looking good, as against less than a third of respondents across the EU.
TheJournal.mt compared these results with the situation in Malta following the 2008 economic crisis. It is quite striking that in the Eurobarometer held in June 2009, only a third of the Maltese respondents expressed their optimism on the Maltese economy. Similarly, only a third felt that the country was heading in the right direction.
This means that the level of optimism in Malta after the 2008 economic crisis mirrors that currently seen across the EU, following the COVID-19 pandemic. Another striking parallel is that in 2009 the Eurobarometer Survey showed that only 36% of the Maltese trusted their government. The same percentage currently seen in Europe. By contrast the latest Eurobarometer shows that nearly half of the Maltese respondents trusted the government.
Business and Consumer Survey
Another recently published survey, this time the Business and Consumer Survey conducted by the European Commission in mid-April confirms that despite still operating under significant restrictions, optimism in Malta has surged. In fact, the Economic Sentiment Indicator has increased by the largest percentage ever recorded since this monthly survey was first conducted, before Malta joined the EU. As a result of this increase, in April, Malta’s consumers and businesses were the most confident across all EU Member States.
More than four-fifths of industrial firms interviewed claimed that their order-books are increasing. A majority of around a quarter of service firms said they are anticipating a rise in turnover and intend to raise their selling prices and employ more workers to fulfil the rise in demand. In construction, operators said that demand is so high they have orders that will take them an estimated 11 months to complete, which is double the historic average.
Sentiment among consumers is equally bullish, with most stating they feel they can currently afford to make major purchases and still increase savings.
The chart below compares the economic sentiment indicator in Malta compiled by the European Commission over the two crises, the one which started in 2008 and the 2020 pandemic. This shows that the level of confidence, economic agents had at the start of 2008 was quite higher than that at the start of 2020. However, it collapsed steadily over the following months. By contrast, the onset of the pandemic led to a sharp decline in confidence in Malta, but this steadily recovered after just a few months. In twelve months, economic sentiment was back at its pre-pandemic level, and then in April it surged well above. By contrast, after the 2008 crisis, economic confidence never recovered to its pre-crisis level.
Observers speaking to TheJournal.mt said that the likely source of the stark difference in the economic sentiment during these two crises lies in the response of government. In 2008, the governement, burdened by a substantial deficit following the general election, could hardly afford to enact an adequate fiscal response. In fact, it cut government spending as a percent of GDP in order to bring the deficit under control.
On the other hand, the current administration is in a completely different situation, having been running substantial surpluses, with the largest one incidentally being an election year – 2017. Consequently, it was able to enact a considerable fiscal stimulus which has maintained businesses and consumers confident.