Elephant in the room

Published on the Malta Today¸ issue Wednesday¸ 20 October 2010


Wikipedia defines the Elephant in the room” as an idiom for an obvious truth that is being ignored or goes unaddressed. The idiomatic expression also applies to an obvious problem or risk no one wants to discuss. I used this title to discuss the unpalatable problem of a low index of national  competitiveness. In the latest Global Competitiveness Report  we  fared badly standing at the 50th place falling behind countries such as Cyprus 40th  Spain 42th  Slovenia 45th  Portugal 46th¸Lithuania 47th and Italy 48 th place. Conversely a sister report published by World Economic Forum’s Competitive Index¸ shows a sustainable improvement in the area of financial market development. It went from 13th to 11th standing.

Another plus in the same report reveals an improvement in the soundness of our banking system. This went up from 13th to 10th. It shows banks carry strong liquidity levels and indulge in relative low leverage compared to other international banks. Back to latest edition of the Global Competitiveness report one not forget  that it is being published amid uncertainty in the global economy and a continuing shift in the balance of economic activity away from advanced economies and toward developing ones. Brazil¸ China¸ and India are expected to grow at rates of between 6 and 10 percent in 2010¸ with
Growth holding up well over the next few years.

Internationally we note that politicians have risked substantial sums as a stimulus aimed at dampening the recession. Not withstanding these enormous bailout money Western economies with the exception of Germany remains sluggish as they are mired in persistent unemployment and weak demand. All this is reflected in the recent challenges faced by Greece¸ Ireland and Spain on the sustainability of sovereign debt. Malta’s economy has contracted by 2 percent in 2009 which is not too bad compared to other Med countries. The improvement in GDP growth gained momentum this year when it registered an impressive growth of 3.9 percent in the second quarter. This was partly the result of improved financial transfers¸ acceleration of tax collection partly due to two amnesties and higher tourist expenditure. Our banking stability and efficient functioning of financial markets have placed us in a better position to fight the recession. But the elephant in the room still concerns unbiased observers who complain that urgent reforms such as that of the transport¸ energy generation¸ pensions and road infrastru