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maltatoday, WEDNESDAY, 13 APRIL 2016 11 Business Today www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way Central Bank projects 5% growth in 2016, unemployment 'at historic low' Central Bank of Malta releases annual report for 2015 amid a relatively subdued global economic activity MIRIAM DALLI Malta will register buoyant growth of 5% in 2016 on the back of strong domestic de- mand, Central Bank of Malta Governor Josef Bonnici said today. Launching the Central Bank's annual report, Bonnici said Malta would register "a healthy level of economic activity" during this year. Real GDP grew by 6.3% in 2015, exceeding the euro area average by a wide margin with domestic demand being the main driver behind this growth – primarily through higher consumption and private investment. The Bank also projects an increase of real GDP of approximately 4.2% during 2017. The strong pace of economic expansion was reflected in the labour market, with employment increasing whilst unemployment retained its downward trend. "The unemployment rate has reached a historical law," the Bank said. An inflow of foreign workers partly supported the increase in the labour supply. A recent Bank study shows that the proportion of foreign workers rose to 10.1% of the total workforce in 2014. "This has added a lot to the flexibility of the economy ... One of the bottlenecks of our economy was the limitation of skill categories. This integration with the euro area has reduced the impact of this bottleneck," Bonnici said. He explained that the majority of foreign workers come from the euro area, as well as third country nationals. A small part are refugees, he added. Bonnici argued that the addition of foreign workers has allowed the Maltese economy to expand according to demand. "Another characteristic of the Maltese economy is that it can adapt to the needs of the time. Our labour supply is much more flexible," he said. Childcare centres have freed up another important capital: the female resource registered the highest growth in the EU, with the potential to grow further. The rate of employment growth in Malta across the years, when compared to the euro area, confirms a steady growth. The average rate of inflation rose to 1.2% in 2015 from 0.8% in 2014. Although price pressures were rather muted compared with historical trends - the reduction in energy bills and a positive inflation through the services sector where tourism performed at a 6% expansion - the annual inflation rate remained above that of the euro area but closer to the 2% ECB target. The annual rate of inflation is expected to remain unchanged at 1.2% in 2016 before increasing to 1.8% in 2017. The Bank estimates that the general government deficit dropped to 1.6% of GDP in 2015 while the government debt ratio fell to 63.6%. Both are expected to narrow further in the coming two years. Banking sector The Maltese banks follow what the Governor described as "a prudent business model" and remain well capitalized. The banks' liquidity is ample and their portfolios are well diversified. The World Economic Forum has ranked Malta's bank soundness among the top 15 countries. On the asset side, the loan portfolio remained that main component for the core domestic banks, notwithstanding slower loan growth during the year. The low interest rate environment continue to pose a challenge for the profitability of banks across the EU. Lending rates to SMEs remain higher than in other euro area countries and have not benefitted from a desirable level of pass through from momentary policy induced interest rate reductions. A recent report by the competition watchdog has made various recommendations on issues related to price transparency, barriers to expansion and consumer mobility, while the bank is also participating in discussions with the core domestic banks to improve the situation. An issue which he has repeatedly flagged, Bonnici reiterated that electronic transfer of money remains expensive. Whilst cheques are free – although more costly for banks to process – banks are being encouraged to modify their electronic systems. The MCCAA is also in talks with individual banks. "A more competitive system means a more competitive economy. A banking system that moves with the times is a system that reduces inefficiencies," the governor said. Malta exceeds its "cash quota" which means that the Central Bank wants consumers to make less use of cash and more use of plastic cards. But for this to be achieved, the banks need to lessen their charges. "Basically we have electronic charges subsidising cheques," Bonnici added. The Central Bank of Malta is also in the process of launching and operating a national Central Credit Register allowing the sharing of information among lenders and between borrowers and lenders. According to the Bank, this would be an effective remedy for information asymmetries. Fines for black market labour to increase to €2,500 Fines for employers taking on unregistered workers will increase up to €2,500 MARTINA BORG The fi nes for those employing unreg- istered workers will rise from €58.23 per employee to €500, rising to a maximum of €2,500 per employee, if employers refuse to pay up straight away and take the case to court. Employment minister Evarist Bartolo and ETC chairperson Clyde Caruana announced the measures in a press conference to present two consultations documents about employment. The two public consultation documents, to be made available online and open until 18 May, will look at the creation of job brokerage offices and the implementation of the Jobs Plus act respectively. "The fines are meant to act as deterrents to precarious jobs and they seek to create a level playing field both for foreign and Maltese e m p l o y e e s facing unfair competition from foreign employees," Bartolo said. B a r t o l o said that the Job Brokerage offices sought to banish the market created by refugees and asylum seekers staying in detention centres waiting for their applications to be processes or for their return if their application was rejected. He explained that the scheme would ensure a drop in precarious work, as well as safeguard the dignity of workers regardless of race, ethnicity and religion. "The act will ensure that no matter what the nationality, the lowest pay people can receive is the minimum wage," he said, adding that this would give dignity to workers, as well as give fairer competition to Maltese employees missing out on jobs due to the cheap payment given to foreign workers. Caruana added that the government would issue a public-private- partnership to man offices in Marsa and Hal Far and to ensure that people making use of the services of refugees, will be obliged to go to the offices. "The office will create a skills profile as well as voucher systems for prospective employers needing the services to fill in according to the type of job needed, as well as the duration of the job in question," he said, adding that the vouchers would be used to verify whether the companies were confirming or not during spot checks carried out by the inspectorate department. Caruana added that service providers would get a minimum of 3.80 an hour, and that refugees would be considered as self- employed, to avoid exploitation. "Employers will also be bound to use services from the same person for under 600 hours a year to avoid exploitation and encourage employers to hire those in question as they would any other employee if they would like to continue using their services." Caruana explained that the fines would also apply to unregistered employees from E u r o p e a n member states. "From our spot checks or has become clear that many u n r e g i s t e r e d E u r o p e a n citizens are being employed and not paid fairly in sectors like the catering business," Caruana said. He explained that the inspectorate department, which would try to increase manpower from eight to sixteen, held some 25 spot checks a day, resulting in around half of the employees in each establishment not having the necessary work permits. "Ensuring that everyone gets the minimum wage will also mean that European citizens will be able to contribute to the local tax system," Bartolo added. Discussing the Jobs Plus act, Bartolo said that ETC had experienced a number of changes over the years, with roles changing from just an entity to register unemployment into an entity where people could find even different employment opportunities. "The act proposes both a different name for the corporation, as well as having better skills matching and training," Bartolo said. Fines employing unregistered workers will rise from €58.23 per employee to €500, rising to a maximum of €2,500 per employee