Economy: strong but fragile

It is natural that Prime Minister Joseph Muscat should take credit for the country’s upbeat economic and financial figures. The economy grew by 6.3 per cent last year and the rating agency Fitch, in its latest assessment, expects 3.6 per cent moving forward. The four per cent unemployment rate is the lowest in the eurozone. The fiscal deficit has fallen to 1.5 per cent of GDP and rating agencies expect the debt-to-GDP ratio to drop below 60 per cent over the next few years.

In Finance Minister Edward Scicluna, Dr Muscat appears to have a steady hand on the tiller. A number of factors have contributed to the positive performance so far. The Labour government has to a large extent maintained the same economic direction as the Nationalist government before it, while its move to reduce utility tariffs has increased consumers’ purchasing power and boosted business competitiveness. At the same time, an effort has been made to reduce bureaucracy.

The financial services sector has been performing remarkably well, real estate is robust and tourism has received a significant boost from the terrorism and turmoil in some of Malta’s neighbouring destinations. Throw into the mix the sharp...