4 - 10 October 2001

Constituted bodies waiting for 2nd quarter GDP figures to assess economy

Constituted bodies are awaiting the publication of the second quarter GDP figures with anticipation to be able to assess whether the economy has grown or whether Malta is in a recession, albeit “theoretical” in nature.
Sources told The Malta Business Weekly that the revised GDP figures for the first two quarters of the year have not been published and this could imply that there may have been zero growth or possibly a slight reduction.
The Malta Business Weekly asked the Central Bank for the latest figures but at the time of going to print, no reply had been received.
While first quarter growth was estimated at around two per cent, observers are awaiting the second quarter figures with anticipation. Normally the growth figures fluctuate from one quarter to another with the average being taken for the year. Although the Central Bank is usually extremely cautious, the way it has reacted to changes in the international economic arena has given rise to concerns that not all is well locally.
The director general of the General Retailers and Traders Union Vince Farrugia said the way the Monetary Policy Council reacted to events over the past weeks shows there is a liquidity crisis. “This is a new system because before we did not get such a response to what is happening.”
After announcing a decrease in interest rates, the Monetary Policy Council last week lowered the reserve requirement ratio by one percentage point from five per cent to four per cent.
The new ratio, which comes into force from the beginning of the maintenance
period which starts on 15 October implies an increase in the volume of liquidity available to the banks and thus represents a further easing of the bank’s monetary policy stance, following the cut in the central intervention rate and the discount rate by 25 basis points announced on 31 August.
The Council arrived at the decision after analysing recent international and domestic economic and financial developments within the context of the objectives of the Central Bank’s monetary policy.
It said that following international developments, the council was concerned about the mounting evidence of a global recess-ion and its likely impact on the Maltese economy.
Moreover, monetary conditions overseas have eased further, as major central banks reduced official interest rates and provided liquidity to the financial markets in the wake of the recent terrorist attacks.
The council considered that local econo-mic conditions were also compatible with a further relaxation of the monetary policy stance.
In particular, the official external reserves have continued to stabilise and pressures on the balance of payments have eased further, while demand remains sluggish and output growth relatively weak.
To this effect, therefore, the GDP growth figures for this year are deemed to be important because they would give a clear picture of the state of the Maltese economy.