17-03-2014, 10:29 AM
ASSIGNMENT OF FOREX MANAGEMENT
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MALTA
OVERVIEW
The Maltese archipelago includes the islands of Malta, Gozo, Comino, Comminotto and Filfla. It has a history of colonial control spanning centuries. Located south of the Italian island of Sicily between Europe and North Africa, it has been occupied by Phoenicians, Greeks, Romans, Arabs and latterly France and Britain. Independence from Britain was achieved in 1964, after the Maltese people were awarded the George Cross for defending the island during World War II. Forty years on Malta was the smallest of the 10 countries to join the EU in May 2004. It joined the euro zone in 2008.
Malta Government
Malta is a politically stable parliamentary democracy on the Westminster model, based on the Constitution of 1964 (modified in 1974). The President is the Head of State, but executive power lies with the Prime Minister and Cabinet; Ministers are appointed from among elected MPs. Malta has declared itself neutral territory.
Malta Economy and Currency
Malta is less affluent than its European neighbours. The economy is heavily dependent on tourism, which accounts for 35% of GDP; there are about 1.2 million visitors a year. Manufacturing industry represents about 25% of GDP. GDP per head is about USD25,700 (2011 est), at the lower end of the range of EU figures, but roughly equivalent to Cyprus, and above those of the other new EU member states. GDP growth in 2010 was estimated at 3.7%, and rose by an estimated 2.1% in 2011.
Unemployment had risen to 7% in 2009. In 2011 and 2010 the figures were 6.3% and 6.2% respectively. Inflation in 2010 was estimated at 1.5%, whilst in 2011 this was estimated to have risen to 2.7%. The government deficit is expected to be 3.5% of GDP in 2012, after running at 3.6% in 2011 and 2010.
Exports are rising, but with limited agricultural land and wholly lacking in energy resources, Malta inevitably imports a great deal.
With GDP below 75% of the Community average, the Commission said in 2006 that the entire territory of Malta will continue to be eligible for regional investment aid at a maximum aid intensity of 30% of the eligible costs. For the period 2007-2013, Malta expects to receive EUR840 million regional aid to deliver growth and jobs.
In May, 2005, Malta was accepted into the EU's ERM (Exchange Rate Mechanism), setting the country on a path towards full adoption of the Euro as from January, 2008. The Council fixed the equivalent rate for the Maltese lira at 0.429300 for one euro.
Interest rates used to be controlled in Malta, but were effectively liberalised in 1995 when the Central Bank increased the ceiling on lending rates to 10% above the discount rate. There remain some controls on interest rates on loans for the purchase of residential property.
In a 2008 report, the IMF statement said that the Maltese authorities must be commended for the successful adoption of the euro on January 1, 2008, calling it "a crucial landmark in their growth-oriented reform agenda".
ECONOMIC PERFORMANCE:
Malta’s economy is forecast to continue to gain momentum this year and is expected to register the second highest growth among the 17 members of the eurozone, according to the EU’s winter economic forecasts published this morning.
According to the report, compiled by the Commission’s economic services, Malta’s GDP growth this year is expected to reach 1.5 per cent, the second highest after Estonia’s 3 per cent. On the other hand, the Commission is forecasting a contraction of -0.3 per cent in the euro area’s GDP growth.
According to the Commission, Malta’s economy, which it described as “gradually gaining pace”, will result in above average job creation (+1.7 per cent compared to -0.8 in the eurozone) and low unemployment (6.4 per cent against 12.2 in the euro area). With regards to public finances, the Commission is forecasting a deficit of -2.9 per cent, up from -2.6 per cent forecast for 2012, and an increase in public debt to 73.9 per cent of GDP, up from 73.1 in 2012. According to the budget estimates, the government is expecting more positive results with regards to the deficit, which is estimated to fall to 2.3 per cent for 2012.
The Commission said that domestic demand is expected to become the main driver of Malta’s economic growth in 2013-2014 and construction investment is forecast to pick up slightly on the back of EU funded projects.
CURRENCY OF MALTA
Maltese euro coins feature three separate designs for the three series of coins. Malta has been a member of the European Union since 1 May 2004, and is a member of the Economic and Monetary Union of the European Union. Malta adopted the euro as its official currency on 1 January 2008, replacing the Maltese Lira. For a period of one month until 31 January, there was a dual circulation for Malta where the Euro and Maltese lira were used alongside each other.
BALANCE OF PAYMENT
The collection, compilation and presentation of the Balance of Payments (BOP) statement of Malta has been the responsibility of the National Statistics Office (NSO) since 1954, the year when such data started to be published by the statistical authorities in Malta. Since 1993, the compilation process has been enhanced by the participation of the Central Bank of Malta. The Bank, through its Balance of Payments (Data Compilation Section), co-operates actively with the NSO in the collection, vetting and compilation of BoP data throughout the year. The BoP statement is compiled on a transactions basis. Both the current and the capital and financial accounts are published quarterly and annually.
The CBM has an additional role in the BoP compilation process. It collects data on cash-based transactions between residents and non-residents as recorded by the local banks on a monthly basis. It also collects and compiles data on the external financial assets and liabilities of the various sectors of the Maltese economy.