A recent Central Bank of Malta study confirms that “inflation-mitigating measures constitute the main form of measures included in the 2024 Budget”.
These include the lowest excise duty that is allowed by the European Commission to be set on fuel imports, subsidies to maintain the price of electricity and gas stable, and grants to help fishermen, farmers, and importers of feed and cereals. Furthermore, the Central Bank experts mention the increase in pensions and other social benefits, including those for parents and for carers. In the meantime, the additional cost-of-living mechanism was extended to cover almost half the population.
The study also mentions that the Government continued to offer incentives to those purchasing property, especially to first-time buyers, while continuing schemes to facilitate the green transition, including incentives for those buying electric cars. Furthermore, the Budget contains several investment measures, the most prominent being the restructuring of Air Malta.
The Central Bank experts note that, despite all these measures, Government will be reducing the deficit by 0.3% of GDP through discretionary measures. The main reason seems to be that subsidies should be slightly less as international prices are expected to calm down somewhat. In fact, if one were to exclude the one-off amount dedicated to the restructuring of Air Malta, the deficit would have decreased by 1.1%, which would be close to the improvement made in 2023.
While the Budget for 2024 increased the Government’s recurrent outlays as social benefits have become more generous, the national debt burden is still expected to remain within the parameters of the updated Stability Programme that the Government had sent earlier to the European Commission. This is so much so that the national debt is expected to be 55.3% of GDP in 2024, marginally better than had been included in the updated Stability Programme.
According to the Central Bank, this reflects the fact that Malta’s economic performance was much better than previously expected. This has led to Government revenues exceeding targets, and permitted Govenrment to provide more support to families and businesses without much net budgetary impact.
It is worth recalling that, in their latest forecasts, the Central Bank economists were more optimistic than the Government itself was when it comes to the performance of public finances. Yet, in their forecasts, they still argue that things may turn out even better than they are predicting.
Photo: Polina Kovaleva