The Opposition has said the Central Bank’s latest Economic Update has confirmed its legitimate concerns on the state of certain sectors of the economy, with manufacturing showing signs of weak performance, and signs of growing public sector expenditure
Manufacturing’s Gross Value Added decreased during the third quarter of 2014, with a continued weak performance in manufacturing for the fourth quarter of the year.
“Contrary to what government has stated, the drop in industrial production is not limited to one area,” shadow finance minister Mario de Marco said. “The overall drop in output was mainly driven by declines in pharmaceuticals, textiles and computer, electronic and optical products. To a lesser extent, decreases were also recorded in the production of wearing apparel and energy.
“The continued weak performance of the manufacturing industry is of concern to the Opposition. In the short run this can, and is in fact, leading to less overtime and shift allowances. If this trend continues it will lead to a reduction in people employed in the manufacturing sector,” de Marco said.
Government’s consumption also went up by 5.9% compared to an increase of 3.2% in private consumption, contributing to a further 1% point to growth in GDP with the largest contributor to GVA being public administration and defence.
Spending during the first three quarters of 2014 increased by 7.7% and public sector wages increased by nearly 8%.
“While this economic strategy by government can work in the short run it cannot be sustained for long periods. The increased government expenditure is leading to a rapid increase in the national debt. Real economic growth has to come from higher activity in the private sector and not the public sector,” de Marco said.
Even the drop in unemployment is being countered by growing public sector wage bill, De Marco said, with 3,000 added to the public sector workforce.
“Faced with rising unemployment in the first year of this legislature, the government resorted to piling people on the public sector wage bill. While this strategy can lead to short-terms gains, it can lead to unsustainable public finances in the long run. The public sector wage bill between 2013 and 2015 is set to increase by €57 million or 9%. Public sector employment cannot and should not be the answer to unemployment.”
De Marco said the PN was calling on government to be more conscious of the economy’s different realities.
“The positive performance of certain sectors of the economy is not necessarily reflected in the performance of other sectors. Government needs to focus its energies in a responsible manner equally on those sectors of the economy that are facing an uncertain future.”
Source: Malta Today