Alfred Camilleri - Permanent Secretary, Ministry for Finance and Financial Services.
Marcel Cassar - CEO APS Bank.
Daniel Debono - EU Affairs Manager Malta Business Bureau.
This webinar was part of the online event “Shaping Malta’s Future: The New Norm” which was held in July 2020.
The Coronavirus Pandemic took the world by storm. Covid-19 started off as an acute health crisis, and in turn, grew into an economic crisis. Fortunately, Malta headed into the pandemic with a very strong economy. In the past three years, Malta saw a 7% increase in GDP, as opposed to the EU area, which only saw an increase of 2%. Consequently, this helped to mitigate the impact that Covid-19 had on Malta and facilitated a quicker recovery in terms of the health of Maltese residents, and in terms of the local economy. Mr. Camilleri pointed out that post-pandemic, Malta witnessed the deepest GDP contraction since World War Two.
Mr. Camilleri acknowledged that the Maltese economy suffered a severe reduction in investments, net exports, and consumption, which are all considered to be the main components of GDP. To contain the virus and to offset the crisis, all governments were forced to impose measures that reduced the movement and gathering of persons, which in turn reduced economic activity. As a result of these fiscal measures, the Maltese government is expected to slip into deficit, and public debt is also expected to rise. He also said that employment declined temporarily because of this pandemic. Despite the significant contraction in GDP, Malta’s economy is expected to bounce back in mid-2021.
Even though the disruptions happened across the world simultaneously, affecting all types of businesses, the impact of COVID-19 is highly asymmetric across all countries and industries. The impact in some countries was much more severe than it was in others, depending on the way that their economy is structured. Having said this, Malta is not an isolated nation, and thus we need to look at the wider context, analysing those countries with which we have deep connections, be it in terms of tourism or supply chains.
Mr. Cassar described the COVID pandemic as a black swan event, as it was sporadic, yet highly disruptive. Last December, the Central Bank of Malta commissioned a survey on systematic risk, and it asked Maltese banks to list the top 10 risks they expected to face during 2020. The replies ranged from cyber risk to Brexit, but the risk of a global pandemic did not feature as one of the top 10 risks expected to occur in 2020.
One would expect that such a crisis would have severely stunted the health of the local banking system, as well as the global banking system. However, in the aftermath of the 2008 financial crisis, international and national banking authorities drafted new regulations and implemented new structural changes to safeguard the well-being of the global banking system, leading to more scrutiny. This helped banks to prepare for such unprecedented circumstances. In fact, Mr. Cassar, CEO at APS Bank, reassured the panel that the banking system is still robust and is not faced by any debilitating risks.
While Mr Debono acknowledged that the EU did its utmost to support local businesses during these trying times, their efforts were hindered due to the fact that the current Multiannual Financial Framework which runs from 2014 to 2020, already utilised a huge portion of available EU funds for the period. Due to the unexpected blow of COVID-19, there were insufficient funds to cover the extensive expenses incurred to assist member states. Apart from financial support, the EU also helped by implementing new policies.
There is still a great deal to be done before Malta’s businesses can fully recover their operations. Mr. Debono suggested that wherever possible, businesses should be using this time to see how they can regenerate themselves into new business models. Having said this, Malta’s economic drivers remain resilient, which will likely help to ensure a faster economic recovery.