3 Economic activity in both the euro area and the United Kingdom, Malta’s largest trading  1  Eurostat Statistics in Focus 31/2008. 2  Financial Times “The cogs are clogged ”, 16 February 2010. 3  IMF Update of World Economic Outlook, January 2010. BIS Review 50/2010  1  partners, declined by 4.1% and 4.9%, respectively. This contraction had inevitable consequences for labour markets, with unemployment increasing to levels not seen in decades. The combination of lower tax revenues and higher outlays arising from the operation of automatic stabilizers and fiscal stimulus programmes took their toll on public finances, with deficits in a number of countries rising close to, or even exceeding, double digit levels. The growth rate of these economies over the coming years will be constrained by the inevitable fiscal consolidation required to bring deficit and debt ratios back to sustainable levels. These recessionary headwinds inevitably took their toll on Malta’s open economy. The impact, however, proved less severe than might have been expected. The economy came out of the recession in the fourth quarter of 2009, after contracting for three consecutive quarters. On a seasonally adjusted basis, the peak-to-trough drop in GDP was around 3.0%, compared to 4.7% in the euro area. The relative resilience of the Maltese economy is attributable to four factors. First, membership of the euro area has enhanced its capacity to withstand external shocks.
Maltese entrepreneurs have submitted more than 600 proposals for funding under the third call of the ERDF scheme, with the total value of assistance requested expected to exceed EUR 40 million. At the same time, an agreement between the Government and the European Investment Fund will provide another EUR 10 million by the end of this year from a specialized EU fund aimed at small enterprises that would otherwise find it difficult to raise up to EUR 25,000 to improve their operations. These initiatives should also help to increase awareness about EU funding schemes. Malta Enterprise is also involved in the management of the Kordin Business Incubation Centre. Between 2003 and 2008, this facility produced over 50 start-ups, with a success rate of 86%. Some of the most successful ventures have gone on to employ more than 100 workers. Within the next few months small enterprises will also benefit from more than 300 industrial spaces that will be made available in three locations, while other parks for micro enterprises in both Malta and Gozo are in the pipeline. Such initiatives facilitate networking among SMEs and can lead to the development of business clusters and consequent positive spillover effects. Initiatives to assist small businesses have also been taken by the private sector. For instance, a major domestic bank has recently teamed up with a leading international software house in a programme designed to increase the success rate of ICT start-up companies.