Economic recovery could be haphazard in 2021 if precautions are not taken

News that the vaccine is being rolled out has been heralded as the beginning of the end to the COVID-19 pandemic, which has crippled businesses across the globe.

Yet, despite the buoyant outlook that such developments may engender, Prof. Josef Bonnici, Chairman of the Malta Development Bank, cautions against raising our expectations too high.

“Hope is tempered when one considers the time needed to distribute it, and vaccinate those willing to be vaccinated,” he says, adding that the economy may, indeed, recover haphazardly in 2021, if certain precautions are not taken.

As from tomorrow, Malta’s first citizens will be receiving the long-awaited vaccine, with over 85s, frontline workers, primary care workers and swab-test centre workers to be first in line.

“We caution against a possible K-shaped recovery, where different parts of the economy would recover at different rates, times, and magnitude. We are aware that certain pockets of the economy, particularly those closely linked to the travel, entertainment, hospitality, and food services, may see a more prolonged recovery period.

“Hence, we believe that economic momentum will be visible from mid-next year, before reaching a more solid and equitable growth path in 2022,” he explains.

Homing in on the 2021 outlook for the MDB, Prof. Bonnici says that although he heads a “relatively young promotional institution”, the past two years have seen the successful launch of schemes to address specific market gaps.

He mentions the COVID-19 Guarantee Scheme as being instrumental to helping businesses survive a horrific year, as well as the Small Loans Guarantee Scheme which helps SMEs access finance at lower soft collateral requirements.

“In 2021, we will continue to keep our ears to the ground by engaging with the business community to better understand the challenges they face and endeavour to create effective new products and improve existing schemes accordingly.

“As Malta’s promotional bank, the MDB will continue to play a central role in accelerating the recovery phase by facilitating the mobilisation of bank liquidity to ensure that credit keeps flowing to the real economy,” he says.

Elaborating on his predictions for next year, Prof. Bonnici says that 2021 is likely to be “a challenging year characterised by a fluid economic landscape.” Yet, the institution will retain its focus on helping companies navigate the choppy waters.

“We are committed to helping businesses navigate uncertainties, and together with their entrepreneurial mindset, we are confident that the large majority of them will not only brave this storm, but also seize opportunities to reframe a future economy that delivers sustainable growth.

“The key is to adapt the business model to the new realities and to re-engineer processes to sustain efficiency and competitiveness,” he concludes.

This was first carried in the 2020/21 Economic Vision