A year of economic regeneration – Where do we stand in 2021?

A year has passed since the Prime Minister launched the Economic Regeneration Plan. Thus, on this anniversary it appears appropriate to try to evaluate what exactly did that plan, titled “Għada Aħjar”, bring about. Did it bring about a better tomorrow as was promised?

The plan had three pillars: reduction of costs and increase in funding; boosting domestic demand; and direct support to industry and in favour of work. To evaluate its success, we will look at three indicators: reliance on moratoria, property purchases, and the number of persons registering for work.

The first indicator relates directly to the first pillar. Denied revenue due to the pandemic and facing high costs, many firms were reduced to a situation where they were unable to repay their existing loans and had to ask banks for a moratorium, a temporary reprieve from repayments and interest charges. The total moratoria amount requested by businesses rose inexorably at first. From €300 million at the end of March, it had more than tripled by the end of May.

The announcement of the economic regeneration plan led to the growth in the moratoria amount to decelerate sharply. Then in August when a lot of the extra funding schemes for business became operational, the moratoria amount started to decline. By November, the amount requested from banks was down to end-April level. The amount has continued to decline consistently since then.

The second indicator compares the amount of promises of sale for residential property against the level a year earlier. This indicator is intimately related to domestic demand, as purchasing property is the largest single purchase individuals conduct. Moreover, it has large multiplier impacts, as a new property frequently requires interior modifications and the purchase of furnishings and appliances. Here again prior to June the situation appeared desperate. The number of promises of sale was falling very sharply and on top of that several prospective buyers were also getting out of promises of sale that they had signed for prior to the pandemic. The economic regeneration plan again worked wonders. In June the situation stabilised and then it changed from one of falling property sales to one of the strongest markets ever recorded.

Finally, the best way to judge the impact of the third pillar – the one intended to directly support industry and work – isby looking at the number of those registering for work. Here the evidence is as clear as can be.

Until the end of May the number of persons seeking employment had been rising at an alarming rate. From just over 2000 at the end of March it doubled in two months, the fastest rise ever recorded in history. The announcement of the economic regeneration plan not only stopped this trend but initiated a trend in the opposite direction.

The last rise in unemployment numbers occurred in the week just before the plan was announced, when those on the register rose from 4,407 to 4,424. From then on, every week the number of those registering has fallen consistently. This is possibly the longest stretch of time when unemployment fell every week. By the beginning of June those on the register had fallen back below 2,000. Imagine that at the start of the pandemic, eminent economists had forecast 50,000 unemployed if nothing was done.

The economic regeneration plan was like a circuit breaker for our economy. The first fiscal packages announced by Government had been defensive in nature. “Għada Aħjar” was different. This was a package of a Government that had gone on the offensive. Economic operators understood that they could hope for the days before the pandemic. That this administration would do whatever it takes to make Malta’s economy great again.

The great work conducted to ensure that Malta acquired and was able to deliver the vaccine was essential for the tackling of the medical emergency. The economic regeneration plan was similarly the single most important factor to bring normality back to the economy. Our future prosperity will largely be due to this brave set of measures and to the hard work of those who were courageous enough to undertake them.

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