The economic shock of the 2020 pandemic was much larger than that of the financial crisis that led to the 2009 recession. However, while after the 2009 recession, Malta’s economic activity had remained subdued for several years, international institutions are all projecting a very sharp rebound after the 2020 shock.
A key difference between the two recessions is the behaviour of investors. Whereas in the 2009 recession, the combined impact of fiscal austerity and the credit crunch from the banks meant that investment was curtailed, in 2020, government support and improved liquidity from banks acted countercyclically.
Data obtained by TheJournal.mt shows that Malta Enterprise approved a total of 190 projects last year, or approximately one project every two days. In 2009, only 28 projects had been cleared, or one project every two weeks. If one takes the whole legislature before the change in Government in 2013 (2008 to 2012), there were just 183 projects approved by Malta Enterprise, or less than in 2020. Despite having to run new huge programmes such as the COVID Wage Supplement, this entity was still able to achieve in one year more than had been achieved in five years under a different administration.
During the year of the pandemic, Malta Enterprise gave the go-ahead to 38 new projects with a foreign direct investment of €77 million. These are expected to generate some 900 jobs over the next three years. By contrast in 2009, only 12 such projects had been approved. Thus, the approved new foreign direct investment in 2020 was equal to the number of all such projects approved in the entire Nationalist legislature between 2008 and 2012.
In 2020, Malta Enterprise approved a total of 190 projects, approximately one project every two days.
While in other countries, analysts are talking of business scaring and pointing at the rising rate of bankruptcies, the very opposite is happening in Malta. Last year 27 new projects by foreign investors who already operate in Malta and Gozo were approved. There were also 119 projects by Maltese and Gozitan businessmen wishing to expand, as well as six projects by new local investors. Taken together, these projects involve an investment of some €63 million and generate approximately 1,000 new jobs.
Back in 2009, there were only 6 FDI expansions, 7 local expansions and 3 local new firms. This amounts to about one-eighth of the approvals granted in 2020. So much so that the results achieved in 2020 in terms of expansions and new local investors were better than those observed during the entire 2008-2012 administration.
In seven years between 2006 and 2012, under a Nationalist administration Malta Enterprise approved 148 foreign investments and 179 local investments, a grand total of 327 projects. In the seven years between 2013 and 2019, approvals more than doubled to 821, of which 265 were by foreign investors while 556 were by local investors. The outcome for 2020 exceeded even the records achieved since 2013.
The number of approved foreign investments, 65, in 2020 was a third higher than the previous record, 49, observed in 2019. At the same time the number of approved local investments in 2020, 114, was a tenth higher than the previous record, 114, also observed in 2019. The worst results were observed in 2010 for foreign investments, and in 2009 for local investments.
The reason for such stark differences in behaviour lies in the incredibly high level of trust and optimism that is characterising investors in Malta. The European Commission’s economic sentiment indicator is a quarter higher than it was before the pandemic started. By contrast if one looks at how confidence evolved during the 2009 crisis, taking a similar span after the initial shock, sentiment was still about a third less than it was before the crisis started.
While rating agencies had downgraded Malta in the aftermath of the 2009 recession, the indications are that this time we will manage to maintain our high ratings. Instead of forecasts being revised downwards, we are seeing them being revised upwards.
This positive climate of optimism and trust in our nation’s track record is making investors ploughing more money into Malta’s economy even at the current juncture. This will ensure Malta’s economy will not just rebound more quickly than originally thought, but also make the recovery more resilient.