The myth of current economic growth

Posted by Max:

The government curries political favour with taxpayers’ money. We know this is happening all of the time.

There is a growing group of hangers-on, dependent exclusively upon handouts in one form or another, who are incapable or unwilling to abide by the realities of market economics. For as long as they are allowed to remain in such positions, they will contribute to the artificiality of the data being released, conveying an island economy with supposed robust economic credentials.

I was curious about last week’s GDP data pointing to annualised 5% + real growth in our economy. I have yet to look at the numbers as the accompanying press release pointed to the reported double-digit gains made in various smaller constituents to this data, while making no reference to the key sectors – tourism and financial services.

A sustainable growth model, in a dependent economy lacking any natural resources, requires foreign direct investment. The investment we have seen in recent years (say the last 10 years) has been tied predominantly to financial services.

Since 2013 (even feeding off the momentum created by the previous administration) subsequent foreign investment has declined DRAMATICALLY. The rate of deceleration is such that the second half of 2016 may well reveal no growth at all once it is published.

The declining trend started the moment this government was elected to office and well before the Panama Papers were released.

When I look at the GDP headline numbers and the ratings agency reports I often ask myself how reliable the economic numbers are upon which those reports are based. This government has lied about so many things that I half expect this to extend to the supposedly independent National Statistics Office.

The Greeks managed to get away with doctoring their economic and borrowing numbers for a number of years, and we know where that got them. I maintain that we in Malta run a far greater risk because we will not merit the bail-outs the significantly larger Greek economy was given by the rest of the European Union.

Prime Minister Joseph Muscat cutting a celebratory cake with Silvio Debono, his wife Veronica, and their four children.