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11 maltatoday | WEDNESDAY • 13 MARCH 2019 Under scrutiny ON 27 February 2019, two trustworthy reports on the state of Malta's economy were published by the European Commission and by the Inter- national Monetary Fund re- spectively. Both reports deserve close attention and their con- clusions should be objectively interpreted. It is a real pity that such reports are quoted se- lectively and their conclusions amply distorted according to one's political agenda in the hope of gaining some sort of political mileage given that the European and Local Councils elections are round the corner. The Commission's report is an analytical document in- tended to provide an overview of the economic and social policies implemented by Gov- ernment. It focuses on the suc- cesses as well as the risks and challenges to be addressed. It was published simultaneously with reports on the other EU member states under the EU's framework for economic and social coordination, known as the European Semester. The IMF report is based on the findings of the Finan- cial Sector Assessment Pro- gramme mission that visited Malta in September 2018 and upon additional consultations in Malta in January 2019. Its aim is to assess the stability of the financial system and to identify key sources of sys- temic risks in the financial sector. It also makes recom- mendations on how best to enhance the sector's resilience to shocks and contagion. The Government is well aware that it would be short- sighted not to take such re- ports seriously. Even though both reports highlight the soundness and robustness of Malta's economic growth, Government does not intend at all to rest on its laurels and has already set in motion consultations to address the shortcomings and risks iden- tified by the reports. In this context it is unfor- tunate and disappointing, though not surprising, that anti-Government political el- ements are still resorting to the old and failed tactics by using these reports as a plat- form from which to throw mud at the Government and some of Malta's established institutions. Both reports highlight Mal- ta's exceptional and unprece- dented economic growth over recent years. They state that annual GDP growth averaged 6.8 per cent in 2013 – 2017, and stood at 6.2 per cent in 2018. At the same time Malta managed to achieve strong employment growth, a budget surplus and a very buoyant services sector, all thanks to a clear vision of this Govern- ment that is reaping excellent results. Successive budget surpluses resulted from increases in current revenue, augmented corporate profits and the pro- ceeds from the Individual In- vestor Programme. The gen- eral Budget surplus enabled Government to undertake an infrastructural overhaul, planned in the longer term too, and to increase pensions and social benefits. Gross Government debt is below 60 per cent of GDP and is pro- jected to continue falling. We are unique within the EU to be able to boast about such a strong economic and finan- cial position that is expected to persist in the future years too. Both the Commission and the IMF conclude that the banking sector in Malta is sound. Overall the banks are well capitalized, have ample liquidity, their profits are healthy and they remain suf- ficiently resilient. The Com- mission report points out that the soundness and resil- ience of Malta's banking sec- tor has been confirmed by the comprehensive results of the stress tests using the Europe- an Banking Authority's meth- odology. As expected the reports fo- cus on the sustainability of Malta's economic growth. They point to the risk that the increased economic activity may in the long run exacer- bate existing bottlenecks and put further pressure on natu- ral resources and infrastruc- ture. There is also the risk that labour shortages, lack of skills and insufficient innovation may reduce growth prospects. A look at the measures an- nounced in this and previous years' Budgets proves how the Government was always proactive and has also indeed anticipated these conclusions of the Commission and the IMF and has already launched initiatives to address the pos- sible risks to economic growth sustainability. Of particular importance are the Govern- ment's investments to support environmental sustainability, to improve educational out- comes and skills, and to pro- mote innovation. The Commission's report includes an assessment of Malta's progress in addressing the recommendations it had put forward in its previous Fi- nancial Semester report. Only two 2018 recommendations are highlighted as areas where the government has made limited progress. Among these Commis- sion concerns is the need to strengthen the overall gov- ernance framework of the fi- nancial services sector. Here, I must note locally the MFSA has also publicly already an- nounced, and is implement- ing, various measures in this respect and I take this occa- sion to laud the approach the Authority is taking generally to this delicate but key eco- nomic sector that, I am con- fident, will strengthen further and create more economic wealth. These sections of the reports that deal with money launder- ing have been pounced upon by the Opposition to fuel its attack on what it perceives to be 'the Government's leni- ency' towards money launder- ing and the resulting damage to the financial services sec- tor. What is conveniently not mentioned by the Opposition is that, in spite of these chal- lenges, the IMF report con- cludes that "key metrics sug- gest that the banking system is in good health", and that "the banking system remains resil- ient under a severe scenario". Moreover, this Government, unlike previous ones that left measures gathering dust on Ministry shelves, has boldly introduced and implemented a number of anti-money laun- dering measures while also noting that this topic requires a comprehensive and strong EU wide approach to address it more efficiently and effec- tively. Of course there are chal- lenges to be met, and the gov- ernment is dealing with these challenges by taking concrete and determined action. It has enacted legislation to trans- pose the 4th Anti-Money Laundering Directive, and in April 2018, it launched Mal- ta's national strategy and plan for combating money laun- dering and terrorism financ- ing. The strategy, composed of seven key initiatives, includes strengthening each of the bodies that lead Malta's fight against money laundering: the MFSA, MGA and FIAU. In many respects the Com- mission's Financial Semester report places Malta far ahead of many other EU member states. For instance Malta is not among the 13 member states for which the Commis- sion felt the need to carry out in-depth reviews. The Commission's report al- so details how Malta has met most of its national targets under the Europe 2020 strat- egy. These targets have been met on employment, which has reached a record low of 3.70 per cent compared to the EU average of 6.6 per cent, tertiary education, and renew- able energy. Malta also performs excel- lently on the indicators of the Commission's Social Score- board set up according to the European Pillars of Social Rights. Far from lambasting the Gov- ernment's performance, the Commission's 2019 European Semester report and the IMF's Financial Stability Assessment present an extremely posi- tive endorsement of the socio- economic achievements of the Maltese Government in the last years. The best and ulti- mate judge of this is, however, the Maltese electorate which by a large majority continues to support the Labour Party in Government that is, and will continue, leading Malta to un- precedented prosperity. Edward Zammit Lewis is a Labour Party MP and chairman of the Foreign and European Affairs Parliamentary Standing Committee OPINION Edward Zammit Lewis

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