Economy looks like 'a car with two punctures' - Fenech

After going through the worst six months of recent years, the economy was showing signs of stability even if the situation remained "fragile", Finance Minister Tonio Fenech said yesterday.

He likened the economy to a car with two punctured tyres: It was "still able to move forward" albeit at a very slow pace.

Mr Fenech was addressing business operators during a business breakfast as part of the pre-budget consultation process.

He reiterated his forecast that 2009 could see the economy shrinking by 0.9 per cent, which was not good but much better than most EU countries.

The minister gave an overview of the economy, pointing out that, in the first quarter, exports dropped by 26 per cent, imports of consumer goods were down by 12 per cent and tourism registered a drop of 41,000 visitors (13 per cent).

Although unemployment was up by more than 1,000 over a 12-month period, the economy was still creating jobs and, in the first quarter, the number of gainfully occupied increased by 1.8 per cent. This was in contrast to the EU 27 average, where the gainfully occupied dropped by 0.8 per cent.

Mr Fenech was concerned, however, that inflation was above the EU average, though he acknowledged that the higher utility tariffs were a major contributory factor.

He did not delve into measures that will be mooted in the pre-budget document but insisted that retaining competitiveness was a major priority.

This would have to be achieved by focusing on employment, investment, tax policy, fiscal sustainability, education and skills, public service reform, research and innovation.

During the activity a number of business leaders put forward their suggestions.

George Schembri, the CEO of the Malta Hotels and Restaurants Association, said the sector did not wish to see any major jolts such as those posed by the utility tariffs last year.

He reiterated the association's disagreement with the planned 50c levy per tourist per night from next year, even if it was delayed. He called for money to be allocated to all-year-round marketing.

Vince Farrugia, director general of the Malta Chamber for Small and Medium Enterprise - GRTU, called for more coordination between ministries and insisted regulators needed to have performance benchmarks which were transparent and accessible.

Joe Farrugia, director general of the Malta Employers' Association, called for a reform of the cost of living adjustment (Cola) mechanism, insisting that, in such difficult times, labour costs could not increase in a blanket way with no regard to productivity.

Grace Attard, president of the National Council of Women, spoke on the need to extend maternity leave as a means to encourage more women to work.