The National Statistics Office has published final data on developments in Government’s Consolidated Fund during 2021. These show that the deficit on the Consolidated Fund fell to €1,242 million last year from €1,468 million in 2020. This marks an improvement of €226 million, or 15%.
While some came out bemoaning the state of Government finances, in reality the performance of the Consolidated Fund was much better than what had been predicted in the Budget speech. Then Minister Caruana had noted that the Consolidated Fund would have a deficit of €1,520 million, deteriorating by €50 million when compared to 2020. In response Bernard Grech had argued that this was wishful thinking as the Minister was being too optimistic as regards his revenue projections. The Leader of the Opposition had intimated that the state of public finances was much worse, and that Government was losing control of the situation.
Now we know that like with his misguided comments on the accuracy of election polls, Bernard Grech was completely wrong on this matter too. Instead of being worse than predicted, the fiscal situation of Government turned up to be €278 million better than predicted during the last Budget.
The performance of the Consolidated Fund was much better than what had been predicted in the Budget Speech.
Moreover, while at the time Government had predicted the gross domestic product to be €13,964 million, we now know that it was €14,534 million. This means that while during the Budget Speech, the Minister for Finances was implying a deficit on the Consolidated Fund of 10.9% of GDP, it actually turned out to be 8.5% of GDP. In essence in relative terms the deficit was nearly a quarter less than originally predicted.
Total revenue ended up being €5,395 million, rather than €5,009 million, reflecting the fact that the economy performed much better than expected. One of the primary causes of this was the extraordinary rise in income tax revenue which was up by over half a billion euros. At the same time VAT revenue improved by over €200 million.
It is pertinent to remember that during his reaction to the Budget speech, Bernard Grech had argued that Government predictions about VAT revenue were preposterous and could not be achieved unless the VAT rate was going to be increased.
While revenue was higher than expected, expenditure was also €108 million more than predicted. This, however, reflected the allocation of a €180 million Energy support contingency fund which will help keep prices stable throughout the current year. More than half of the rise in expenditure compared to 2020 was due to COVID-19 Business Assistance or to energy support measures. Malta’s contribution to the EU also increased by nearly €100 million reflecting Malta’s faster convergence to the EU median income. Expenditure on health also rose greatly, by another €100 million over the 2020 outlays.
The Opposition’s claims that Government finances are out of control are clearly disproven by the outcome of the Consolidated Fund for 2021.
Furthermore, February data show that the state of public finances is well under control and things seem to be gradually going back to what they had been pre-pandemic.