Fitch Ratings have just reaffirmed their A+ rating for the Maltese economy. It appears that these international economic experts did not give much consideration to the overtly negative economic assessment that has been showcased by the Opposition since the Budget.
Growth forecast for 2022
As a reaction to the Budget, the Opposition had erected a billboard claiming that Malta was in its worse recession for 40 years. Let us leave aside the obvious retort that who in his right mind would try to pin the blame of the economic impact of the pandemic on the administration.
Instead, let’s look at Fitch’s latest set of forecasts. In their first assessment this year they were predicting that in 2022 we would grow by 3.9%. Now they are anticipating 6.1%. That is one and a half times their original forecast.
Fitch updated their assessment of Malta’s economic growth in 2022 from 3.9% to 6.1%
Moreover, they have stated that the primary reason for this upward revision was the successful vaccination programme. Now the Opposition has not had any role in driving the vaccination programme forward. With the exception of Dr Stephen Spiteri, who has worked alongside Chris Fearne, the other members of the Opposition have been equivocal with some even claiming that the vaccine is not the solution.
Recovery & Resilience Plan
This is not the only case where the Opposition’s assessment flies in the face of expert opinion. Opposition Leader Bernard Grech had called the Recovery and Resilience Plan “a froġa”. The experts at Fitch, who have no hidden agendas, declare that “as part of the Resilience and Recovery Plan, the government presented a comprehensive reform and investment plan with the aim to strengthen the education and health system while achieving climate neutrality and further promoting digitalization.”
Keeping inflation low
Another big campaign of the Opposition has been that Government is stealing from families and businesses and is letting inflation run loose. Let us leave aside the press releases that month after month Eurostat is issuing that invariably show Malta with the lowest inflation rates across the EU.
Fitch says: “the government is committed to keeping prices low and most recently announced an immediate decrease in excise duties for petrol and diesel by 27% and 20% respectively to the minimum levels allowed under EU regulations.”
International experts note how Malta is managing to keep inflation low whilst other countries are doing so badly, because Government is reducing the burden of taxation. This is the exact opposite of what had happened prior to 2013. Then, the conservative administration had compounded the effects of higher international fuel prices by raising excise duties, in effect increasing its take under the cover of the international situation. Now Labour is shielding consumers and giving them the best deal in the EU.
Revision of deficit due to better than anticipated budget execution
Now if one believed the Opposition’s narrative that our country’s finances are dire, this would be impossible. A bit like King Canute attempting to stop the tide. But international observers know full well that while the Conservatives had landed Malta three times in the excessive deficit procedure – an unbeaten record of fiscal incompetence across time and across the EU – Labour has a track record of fiscal excellence.
In fact, whereas when the Conservatives were in power, international agencies did not believe their positive forecasts of the state of public finances, the opposite is happening with Labour.
The Minister for Finance declares that the deficit will be a given amount, and international agencies tell him that he is mistaken and things will be much better than what he is saying. This is exactly what the latest Fitch report states:
“We have revised our projection for the 2021 deficit in light of the better than anticipated budget execution to 8.4% of GDP from previously 11.5%, below the government’s current forecast of 11.1%.”
That is the perfect example of a diametrically opposite assessment. The Opposition saying things are much worse than what the Government is saying and international rating agencies saying that things are much better.