Given the large decline in activity during 2020, the interpretation of standard macroeconomic indicators will be somewhat tricky during 2021. The nature of percentages is such that if an economy has fallen by 8% in a year, if the following year it increases by 8% it will still be below what it had been before. So international institutions such as the World Bank and the International Monetary Fund argue that the priority of Governments around the world should not be on growth rates in 2021, but rather in trying to bring economic activity to the level it had been before the pandemic broke out as soon as possible (i.e., 2019 levels).
Official data suggests that in the case of Malta, this target is already being met. In fact, in the first quarter of 2021 Malta’s gross domestic product was €2,937 million, which was just above the first quarter of 2019 when our country produced €2,936 million. In contrast, Eurostat estimates indicate that across the European Union, activity in the first quarter of 2021 was 4.4% lower than in the first quarter of 2019. In the Euro area, the situation was even worse, as the economy is still down by 5%. This is indeed the estimate for the German economy, as can be seen in the table. The most worrying results are those for Italy and Spain where losses in output are still between 6% and 7%. Malta is one of a few EU countries where the economic recovery seems to have started on a good basis. On the basis of the available data, only Lithuania and Romania are faring better.
Statistics confirm how resilient the Maltese economy continued to be during the first quarter of 2021. In fact, compared to the previous quarter, the GDP level remained relatively stable, while there was a decrease of 1.8% compared to the same quarter a year earlier. According to Eurostat, in the same period the German economy saw a decline of 3%, or almost twice as much as our country, while the Spanish economy had a 4.3% decline. In Portugal, a tourism dependant country like Malta, economic activity in the first quarter of 2021 decreased by 5.4%, or three times more than Malta.
The effects of the pandemic started to be felt in Malta in late February 2020, and so for more than half of the first quarter of 2020 the Maltese economy was still growing at a strong pace. The fact that nevertheless many sectors still improved on their operations in that pre-pandemic period indicates how resilient and innovative they were. The decline in overall value added in our country was due entirely to the retail, transport, hotel, and restaurant sectors. As for the other industries, there was an overall 3.3% growth on their activity in the same period a year earlier. This is a much better result than that achieved in the previous quarter.
According to Eurostat, the German economy saw a decline of 3%, or almost twice as much as our country.
The biggest growth, 12%, took place in information and communication, which also includes IT and computer programming companies. This was followed by public administration and health where activity increased by 9%. Other services, including remote gaming, saw a growth of 7%, while the financial sector also had a similar rate of expansion. Despite all odds in agriculture and fisheries, a growth of 4% was observed compared to a year earlier.
Although the tourism sector was virtually closed in early 2021, the level of exports of goods and services was almost equal to that in the same quarter of 2019. This reflects the positive performance of several factories, particularly those involved in currency printing, as well as the expansion of digital sectors, which seem to have accelerated more during the pandemic.
Another outstanding fact is that the total compensation of employees paid in the first quarter of 2021 was a record in the history of our country. In fact, labour income of €1,556 million was recorded; an increase of €13 million over 2020, and of €116 million over 2019. Even companies’ profits started to recover in 2021, up by €120 million compared to the first quarter of 2019.
The results observed in the first quarter of 2021 are the best registered by Malta since the start of the pandemic. While in other countries the recovery has not gone well yet, Malta’s productive capacity has been safeguarded, thanks to the government’s aid package. This is why international institutions are so confident that Malta will lead the way in terms of the rapidity of its economic recovery.