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Doom and gloom
Import/export figures for the first five months of the year
reveal a situation that is not encouraging and heralds a slowdown
in the local economy. This is now also hitting the domestic
market. As more and more companies face cash flow problems,
consumer spending appears to have decreased to a trickle.
This was more than evident over the past two weeks at the Trade
Fair in Naxxar. Year on year sales have been decreasing over
the past three or four years, however exhibitors this year feel
that the situation could not be worse. To make a sale, many
resorted to giving fantastic discounts, giving buyers an excellent
deal. But even then, there were too few buyers. The slowdown
in the economy, especially in the domestic market, is undoubtedly
the result of a general malaise in the economy as a whole but,
more importantly, the severe cash flow problems that companies
are struggling to address.
The gravity of the situation becomes more obvious when a group
of companies group up to form an association to tackle the problem,
and when numerous creditors resort to the Courts to recoup their
monies. The situation at the Price Club is a perfect example.
The government has not readily admitted that a cash flow problem
exists, although parliamentary secretary Edwin Vassallo did
hint that the accountancy profession was to blame for giving
the wrong advice. It is easy to point fingers and blame someone.
The government has said that the economy is not doing as well
as it should, but any measures being taken are giving results.
The taxation on fringe benefits will undoubtedly add a few million
liri to the nation’s coffers... but out of the people’s
pockets. Meanwhile, families are having less to spend. This,
in turn, means that retailers and traders do not make any sales,
therefore the economy comes to a halt. Figures released last
week show that inflation has remained below the two per cent
level. This is a positive sign however the Central Office of
Statistics figures on exports and imports over the first five
months reveal a worrying pattern.
Total imports were down by Lm105.8 million, or 18.4 per cent,
to Lm469.5 million. Imports of industrial supplies also declined
by Lm93.6 million, to Lm238.4 million. Importation of capital
goods dropped by Lm7.2 million, to Lm80.8 million, and importation
of consumer goods, by Lm6.2 million, to Lm109.3 million.
The export sector did not recover either. Total exports declined
by Lm60.3 million, or 14.6 per cent, to Lm353.9 million. By
contrast domestic exports dropped by Lm54.4 million, to Lm320.8
million, and re-exports by Lm5.9 million, to Lm33.1 million.
The local economy is in dire need of a boost. Although part
of the blame lies with the private sector which, admittedly,
has depended too much on living off other people’s money,
the government has introduced new fiscal measures without taking
into consideration the microeconomic realities that exist. Both
Finance Minister John Dalli and Economic Services Minister Josef
Bonnici need to put their heads together and come up with a
plan to revive the economy. Not talking heads but something
tangible, feasible and most important, that does not tax either
the individual or industry in general. Whether this is feasible
or not, only these two gentlemen can tell us. We augur that
they have the answer.
Price Club
After weeks of rumours and uncertainty over the future of the
Price Club, the chain of supermarkets faces closure unless it
is taken over or given a hefty cash injection. With nearly Lm8.4
million in debts, there is little hope that a local investor
will willingly take on the burden. This leaves the option of
handing over the Price Club to foreign operators, something
the Association of General Retailers and Traders (GRTU) is totally
against.
It is a great pity that one of the leading supermarket chains
in Malta risks closing down. It is also a pity that someone
failed to heed the warning signs earlier on and therefore avoid
a very awkward and embarrassing situation. The Price Club’s
creditors are right in demanding what is due to them but The
Malta Business Weekly is also worried about the impact a possible
closure could have on the local economy and the unemployment
situation. What is going to happen to the chain’s employees?
Are they going to find alternative employment or will they be
added to the list of those seeking employment? Will the employees
receive any form of compensation?
So many questions but few answers. Is there still any hope for
the Price Club?
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