The Malta Chamber of Commerce, Enterprise and Industry in a statement took note of the recently published report and ‘A’ Rating for Malta. The Malta Chamber is satisfied that the agency has, once again, acknowledged the country’s relative economic resilience despite the fluid situation in Europe and beyond.

The Malta Chamber, however, by no means believes that the latest Fitch report gives any reason for the country to become complacent about its economic performance especially when the contents of other recently published reports are taken into consideration.

Fitch itself acknowledges that Malta’s rate of economic expansion – although higher than the euro area average – is generally attributable to domestic demand. This, in itself, is a note of caution because domestic demand on its own cannot sustain long-term growth for the country.

Lasting economic growth needs to be driven by export-led activity and this requires the country to be competitive. It is worth noting that the recently Pre-Budget document published by the Ministry of Finance states that in the first half of 2014, Malta’s main productive sectors, namely Financial Services, Manufacturing and Agriculture, all recorded negative gross value added contributions to the economy.

To this end, the Malta Chamber points towards the official monthly Industrial Production (seasonally adjusted) data released by NSO. The latest statistic for July 2014 records a significant drop when reviewed over a 1-month or 12-month basis.

The Malta Chamber also notes the World Economic Forum Competitiveness Rankings published last week in which Malta slipped six places and now stands in the 47th place. According to this report, Malta scored weakly in terms of ease of doing business (business start-up procedures). Innovation, labour market efficiency and certain aspects of infrastructure including roads and electricity supply.

It is also relevant to mention another recent country report on Malta – released earlier this month by the European Commission. Here it is remarked that productivity growth in Malta has lagged behind the euro area average over the past decade. This is to be viewed against a background wherein – according to the Pre-Budget document average compensation per employee increased by 12 per cent in Malta between 2008-2013 as opposed to 8.7 per cent in the remainder of the European Union. At the same time, Malta’s real labour productivity per person employed declined by 3.3 per cent between 2008-2012 whilst it increased by 1.1 per cent in the rest of Europe.

Of particular significance to the Chamber is Fitch’s warning about Enemalta and the risk this entity poses on the country’s fiscal performance. The agency makes reference to the fact that the reduction of commercial energy tariffs in March 2015 adds to the risk. In light of the fact that Maltese business is burdened with the second highest energy tariffs in the European Union where the average rate is approximately half of that prevailing locally, the Malta Chamber hopes that the risk being taken by the authorities is a calculated one. This is because Malta’s export competitiveness cannot afford anything less than what was pledged by this Government prior to taking office.

In fact, even with an average 25 per cent reduction as promised, industrial electricity rates in Malta will remain substantially higher than those applicable, on average, in the EU which, in turn are more than 100 per cent higher than those applicable in the US.

Government may do well to shed light on a claim made in the EU Commission’s country report on Malta wherein it is stated that Malta’s eventual connection to the European Gas Network would result in further price reductions for households (25% on average in 2014) and businesses (15% on average in 2015).

It is clear therefore that future economic prosperity is dependent on courageous political decisions and reforms that Malta needs to undertake in order to rectify inhibitors to future sustainable growth.

The Chamber therefore reiterates its urgent appeal for discussion on national competitiveness to be initiated in earnest at MCESD level in an attempt to resolve long-standing issues to ensure the right conditions for the generation of growth and prosperity in the country.