Malta’s financial sector has so far weathered the global turmoil relatively unscathed; the real economy has been decelerating since the last quarter of 2008. The staff report for Malta’s 2009 Article IV Consultation underlies economic developments and policies. The fiscal position deteriorated sharply in 2008, owing to one-offs and spending slippages. The current account deficit improved to 5½ percent of GDP. The immediate goal for fiscal policy should be to mitigate the negative spillovers on activity from the global crisis without compromising the already fragile public finances.

Abstract

Malta’s financial sector has so far weathered the global turmoil relatively unscathed; the real economy has been decelerating since the last quarter of 2008. The staff report for Malta’s 2009 Article IV Consultation underlies economic developments and policies. The fiscal position deteriorated sharply in 2008, owing to one-offs and spending slippages. The current account deficit improved to 5½ percent of GDP. The immediate goal for fiscal policy should be to mitigate the negative spillovers on activity from the global crisis without compromising the already fragile public finances.

V. Malta: Fund Relations

(As of June 30, 2009)

Article IV mission: Discussions were held in Valletta, June 11–22, 2009.

Staff team: Mss. Allard (head), Lusinyan, and Herzberg (all EUR).

Country interlocutors: The mission met with Minister of Finance, Mr. Tonio Fenech; Central Bank of Malta Governor, Mr. Michael Bonello; and other senior officials. It also met with representatives of financial institutions, the private sector, employers and labor unions, opposition, and academics. The authorities agreed to publish the concluding statement.

Data: Malta participates in the IMF’s General Data Dissemination System (GDDS) and has targeted subscription to the Special Data Dissemination Standard (SDDS) for end-November 2009.

I. Membership Status: Malta became a member of the IMF on September 11, 1968. It eliminated all remaining restrictions under Article XIV of the Articles of Agreement and accepted the obligations of Article VIII (Sections 2, 3, and 4) of the Articles of Agreement on November 30, 1994.

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

None

V. Latest Financial Arrangements:

None

VI. Projected Payments to the IMF:

None

VII. Exchange Rate Arrangement and Restrictions: Malta joined EMU on January 1, 2008 at the central parity of Maltese lira 0.429300 per €1. Malta maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions, except for restrictions maintained for security reasons which have been notified to the IMF pursuant to Executive Board Decision No. 144-(52/51).

VIII. Article IV Consultation: The last Article IV consultation was concluded on August 11, 2008. Malta is on a 12-month Article IV consultation cycle.

IX. Technical Assistance:

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X. Resident Representative:

None.

VI. Malta: Statistical Issues

Data provision is adequate for surveillance purposes. Significant progress in improving macroeconomic statistics has been made in close cooperation with the European Central Bank (ECB) and Eurostat while upgrading statistical systems to meet the euro area standards.16 However, national accounts and balance of payments data have remained subject to substantial revisions, often affecting several years. Most macroeconomic statistics can now be accessed through Eurostat. The country has been a participant in the GDDS since September 11, 2000, with the metadata posted on the IMF’s Dissemination Standards Bulletin Board. In 2009, the IMF continued to provide technical assistance to the authorities in order to finalize preparations for SDDS subscription. The review of Malta’s data production and dissemination practices found that SDDS requirements are met or exceeded for 17 of the 21 required data components. Planned short-term improvements in the remaining four components—relating to external debt template, the industrial production and producer price indices, and the dissemination of the international investment position (IIP) data—will bring data production and dissemination practices in line with SDDS requirements. In consultation with STA, the target date for SDDS subscription is set for end-November 2009.

Real sector statistics: Data on retail and consumer prices, labor market indicators, and tourism arrivals are released monthly, usually with a short lag. These data are available through Eurostat and via the Internet at the Central Bank of Malta (CBM) and the National Statistical Office (NSO) websites. Presently the NSO releases national accounts data in euros with one quarter lag. Statistical discrepancies (captured under stock building) are often large, particularly on the first release, and typically lead to sizable revisions. Supply-side GDP estimates by type of economic activity are not available, but the recently published producer price index will facilitate their compilation. A planned monthly manufacturing output index with timeliness of one month is expected to be available for public dissemination before end-2009. National accounts imports and exports data are not disaggregated into goods and services. The harmonized index of consumer prices was first published in May 2004.

Government finance statistics: Fiscal statistics meet basic requirements, with quarterly accrual-based data on general government operations compiled in accordance with the ESA95 methodology and disseminated with a one-quarter lag. The general government comprises data from the consolidated fund of government adjusted to include other accounts of government, the accruals elements, and the financial performance of the Extra Budgetary Units and of the Local Councils. The NSO also publishes monthly statistics on the cash operations of the central government, for which the authorities plan to utilize the targeted timeliness flexibility option in light of additional time required for the final month of the fiscal year.

Monetary and financial statistics: Monetary statistics are timely and of good quality. Since the entry into the euro area in January 2008, monetary data for IMF statistical publications are now obtained through a gateway arrangement with the ECB, thus reducing the reporting burden of the country. The country participated in the pilot project—Coordinated Compilation Exercise—for Financial Soundness Indicators and submitted indicators as of end-2005 along with metadata, which are now available to the public through the IMF’s website (http://www.imf.org/external/np/sta/fsi/part.asp?iso=MLT).

External sector statistics: Summary data (merchandise trade, current account balance, and selected financial account data) are released on a quarterly basis with a lag of about three months. More detailed BOP and IIP data are released annually, the latter with a lag sometimes exceeding one year. Summary trade statistics are released monthly with a lag of about 40 days. The CBM plans to disseminate the external debt template in line with requirements of the SDDS and recommendations of the External Debt Guide as well as make some minor changes (in coverage and classification) to the Reserves Template currently being disseminated. It is also expected that Malta would be in a position to disseminate the 2009 IIP data with an SSDS required timeliness of three quarters.

Malta: Table of Common Indicators Required for Surveillance

(As of July 15, 2009)

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis a vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

Reflects the assessment provided in the data ROSC (published on August 18, 2006, and based on the findings of the mission that took place during June 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 7, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, assessment, and revision studies.

16

The 2007/08 Eurostat peer review on the implementation of the European Statistics Code of Practice found that the NSO had reached a remarkable compliance with large parts of the Code despite its small size, but underscored the need to improve adequacy of resources and data quality management.

Malta: 2009 Article IV Consultation: Staff Report; Supplement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Malta
Author: International Monetary Fund