Editorial | Needed: a dynamic push for the private sector

There has been much talk of the feeble drop in unemployment levels in the Maltese labour force, but this is not a true reflection of the impact experienced due to the COVID-19 pandemic.

COVID-19 led to an exodus of foreign workers that were very probably representative of the working segment that was not regularised or entirely on the books. The other segment refers to foreign workers on contract who could not continue in their local employment.

Timely government intervention led to many jobs being saved. And the continued injection of direct aid to businesses and the service industry ensures, to some extent for now, that businesses do not flounder and jobs will be retained.

There are ominous signs on the horizon: in June retail trade declined by 8.4% from the previous year, following a fall of 12.2% in May. Confidence within the retail sector fell to a new historical low of -53.6, from -30.1 in the previous month. In June the number of persons on the unemployment register stood at 4,270, down from 4,409 in May but still higher than 1,616 registered a year earlier. The annual growth in the industrial production index, which measures economic activity in the quarrying, manufacturing and energy sectors remained negative for the third consecutive month. The index fell by 3.2% in annual terms, following a sharper contraction of 7.7% in May.

Additionally, the turnover from selected services activities decreased by a massive 27.1% over the same quarter in 2019, as a result of reducing consumption and working hours from the COVID-19 pandemic. That is data gleaned from 900 questionnaires to businesses, requesting information on turnover, employment, wages and salaries, comparing these levels with previous years.

The worst decreases in turnover were recorded in the accommodation and food service activities (87.1 per cent), administrative and support service activities (49.3 per cent), transportation and storage (47.6 per cent), real estate activities (46.5 per cent), motor trade (37.3 per cent), wholesale trade (21.8 per cent), retail trade (13.5 per cent) and professional, scientific and technical activities (8.5 per cent).

It is clear that government has to continue sustaining its aid package to every sector.  Without this, many local businesses will axe jobs and others will simply close down. Many small businesses are already struggling as it is.

Beyond saving businesses, there needs to be some forward-planning that will kickstart new initiatives and new ventures in the business world that will tap into new markets. Small businesses themselves require an army of business consultants to help them cut costs and adapt to the new market realities of COVID-19. And we need strict law enforcement on pandemic restrictions so that the continued misbehaviour of those who do not respect public health rules, does not lead to mass closures of businesses.

This is necessary if we are to expect new economic drive in a world which is increasingly competitive, even in a depressed and moribund market. This precarious moment requires that solidarity is shown towards the private sector from a government which has a bloated employment complement.

The public sector wage bill has remained untouched, whilst the productivity of the private sector has had to make do with reduced turnovers, reduced wages, and reduced profits.

Is this sustainable? The government has to look inward and ensure its own savings can be turned into a dynamic push for the private sector, if it is to safeguard an economy built on innovation and competition.