Author: George Mangion
Published on Business Today 29 October 2020

Official publications warn us of how the economy of Malta shrank 16.2% year-on-year in the second quarter of 2020, the biggest contraction ever due to the coronavirus crisis. There were widespread contractions across all main sectors of the economy.

The services sector fell by 15.7% mainly due to a 100.2% plunge in accommodation and food services as tourism halted. With these facts hurting our wellbeing, can we hide our head in the sand or shall we stand tall and face the future with courage and determination.

In fact, the latter is the wholesome attitude assumed by our prime minister when addressing the party faithful in his regular walkabouts over the island. He is reported smiling, consoling us that fewer deaths have actually occurred than the thousands predicted at the beginning of the pandemic. Again, while many EU countries are resorting to full lockdowns to stem the spread of infections (for example Britain has branded each town according to a three-tier system) yet Malta seems to tread cautiously on the introduction of a second lockdown.

The business lobby is strongly against another lockdown knowing how sales were dismal during the first lockdown. One need not ask, why is there a drop in confidence when the government is labelling its ninth budget as being the best ever? Promotion for the budget was hinged on the theme that the state has tripled welfare handouts and is paying a €5 weekly increase for pensioners – this is a generous budget.

New Covid-19 precautions issued with no mass gatherings allowed, a six-person limit is imposed and everyone venturing outside has to wear a mask or an approved visor. Bars and ‘kazini’ will be closed starting from next Thursday and reopen in the first week of December.

Why is a mask essential. This is because when sneezing many of the larger droplets will quickly settle onto nearby surfaces while smaller ones remain suspended in the air for hours, where they can be breathed in. While the behaviour of the virus-filled droplets in rooms with air conditioning and outside environments are less well understood, they are thought to settle on 2 surfaces more quickly in disturbed air.

Even experts who advocate masking communities say their impact on stopping the spread of disease is likely to be modest. The more people in a given space wear masks at their place of work, the fewer viral particles are making it into the space around them, decreasing exposure and risk. Will wearing masks become a habit for us as is the case in Asian countries?  Not likely.

One bets that Malta will be the first in the Med, to become unmasked. On the contrary, in Paris, the wearing of designer masks is becoming quite fashionable.  While medical-grade masks such as the N-95 mask provide the best protection against the spread, they’re more expensive to use and in certain countries, they are mostly reserved for use by front-line healthcare workers.

Masks are really a perfectly good public health intervention mainly as a means to protect people against the droplets coming out of their respiratory tract especially from infected people. It is true that people who feel ill aren’t supposed to go out at all, but initial evidence suggests people without symptoms may also transmit the coronavirus without knowing they’re infected. Surveys show how nearly half of SARS-CoV-2 transmissions occur before the infected person shows any symptoms.

Take Italy – it has had a terrible experience with more people have now died in the land of “La Dolce Vita” than in China, where it originated.  Back home, our prime minister is gung ho.  He is ebullient about the 2021 budget proposals announced last week with generous measures which in his opinion, will help incentivise businesses.

On One TV, he proudly announced that his government wants businesses to be innovative and be up and running.  Domestic demand must be rekindled with a feel-good factor ignoring the stark fact that the number of daily infections has peaked to over 200.  This autumn, schools started late due to last-minute protective measures put in place and had to be rushed in much to the chagrin of teachers.

The private sector is by now mostly working from home except where physical handling of merchandise or working at factories are concerned.  Let us review the Labour Force Survey for Q2 2020, this estimate indicates that, during the second quarter, total employment stood at 259,523 while the unemployed persons stood at 12,031.  By elimination, inactive persons totalled 166,861 (38.1 per cent) which is higher than the EU norm.

Few appreciate that persons working in the public sector including administration, defence, education, human health and social work activities (males and females) amount to 56030.   Now the budget speech tells us that wage supplement till now, saved 100,000 jobs.  This is a singular fact.

Taking into consideration total employment of 259,523 less 56,030 state dependents, this leaves a non-public working population of 203,493 out of which almost half are kept afloat by the wage supplement scheme.

Obviously, this is a precarious situation. This wage supplement scheme was originally meant to end last June but was extended five times on a monthly basis up to October. The finance minister after consultation with various stakeholders and unions decided to extend the scheme up to March next year.  This is a generous welfare benefit to 100,000 workers, some of which are actually working on a three-day week.

One must, of course, be cautious not to sound too magnanimous about the living conditions of such workers.  Most earn no overtime and are living on a replica of Victor Hugo’s miserable conditions. The more negative news is the effect of a No-Deal Brexit which now seems more imminent than ever.

For many factories and importers who for many years did substantial business with the UK, the worst-case scenario will probably mean a lower volume of business next year until diversification takes place. In the eventuality of a no-deal, the Chamber of Commerce and the Malta Business Bureau are urging Maltese businesses to prepare for all eventualities.

A joint statement stated that “while fully convinced on the need of a comprehensive partnership deal with the UK, the chamber and the MBB are calling on Maltese businesses not to be caught off guard, particularly at this moment when businesses might be focusing on finding a way to navigate through the COVID-19 crisis”.

In conclusion, following every great crisis, the world witnessed an increase in innovation, and new business ideas and models, consequently – the budget proposals currently debated in Parliament should ideally help innovators and start-ups overcome difficulties when climbing the slippery slope.

Author: George Mangion
Published on Business Today 29 October 2020
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