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12 maltatoday | SUNDAY • 27 JANUARY 2019 NEWS ECONOMY KURT SANSONE MEN in bright yellow vests are synonymous with Malta's con- struction boom that is at the heart of the country's economic success. Official statistics show that construction contributes around 4% in gross value added to the economy, an unimpres- sive figure. But economists like Philip Von Brockdorff believe the impact of the industry is grossly undervalued. Last year, the Planning Au- thority approved permits for more than 12,000 dwellings, a two-decades-old record (see separate story on front page). This excludes permits for com- mercial establishments. And with the Prime Minister saying that one of the problems facing companies that want to relocate to Malta is the lack of office space, it appears there still is a strong demand for new buildings. The construction spree, rising incomes and a bigger resident population, contribute to do- mestic consumption, which is becoming a strong economic driver in its own right. Malta is passing through an unparalleled run of strong economic growth that is way above the Eurozone average. In the third quarter of 2018, the economy grew by 7.5%. But Brockdorff cautioned against a growing dependence on construction. "We have become heavily de- pendent on construction and this has an impact on the sus- tainability of the economy… obviously, construction will remain an important indus- try but it is important to micro plan development and channel it in areas the country needs," he said. Malta will remain, for the fore- seeable future, a place where men in yellow vests ply their trade in the myriad construc- tion sites around the islands. But yellow vests in France tell a different story altogether. Yellow: the colour of inequality The Yellow Vest movement, a loose coalition of anti-estab- lishment campaigners, ordinary taxpayers and far-right activ- ists, has taken France by storm. Born out of protests over a planned fuel tax hike, the move- ment has so far been resilient, hitting out at French President Emmanuel Macron for what is perceived to be his aloofness from the everyday problems of the ordinary French. Brockdorff believes this movement is a manifestation of rising inequality that is a threat to stability. The movement, which has no apparent leader, has said it will field candidates in May's Euro- pean Parliament election and polls have given it 10% support. "The Yellow Vest movement is a manifestation of growing inequality and this is something that can rock the political es- tablishment causing more un- certainty if left unaddressed," Brockdorff said. Inequality is one of the many risks looming on the horizon. On 21 January, the head of the International Monetary Fund, Christine Lagarde, said the or- ganisation was once again cut- ting its global growth forecast Two yellow jackets, two stories, one global economy The situation is nowhere near the boiling pot in France. Malta's yellow vest 'problem' is a different kettle of fish altogether but government may have to do more to stymie inequality "We have become heavily dependent on construction and this has an impact on the sustainability of the economy… obviously, construction will remain an important industry but it is important to micro plan development and channel it in areas the country needs" Malta will not be immune to a global economic slowdown. Depending on how severe and widespread it is, this could manifest itself in less investment, fewer tourists and general uncertainty GDP growth over the projection horizon (percentage point contributions; annual percentage change) Source: Central Bank of Malta