€345 million to boost the Maltese economy’s recovery and resilience

During the 2008 financial crisis, the European Union’s economic response was lacklustre. A misguided focus on austerity policies led to an amplification of the economic shock. It took the EU’s employment level till 2017 to return to its 2008 level. Truly, a lost decade for millions of people, especially youths.

Against this background, the coronavirus pandemic could have proven a breaking point for the EU. If Member States had not stood together against this existential challenge, it would have been very likely that the pressures that some years ago nearly broke the Economic and Monetary Union could have led to a real split this time.

The Recovery and Resilience Facility (RRF) proposed in May 2020 has the potential to wield together the Union and galvanise it for decades to come. It will inject potentially over €670 billion in loans and grants, the equivalent of 53 times Malta’s annual GDP, around the EU. For Malta, the allocation in grants is set at €345 million. This is equivalent to two-fifths of the loss in our GDP during 2020. Our country could also tap into the loans component of the EU programme but given the huge amount of liquidity in our banking system, Government’s decision to borrow internally rather than from the EU makes considerable sense.

The plan issued by Government as to the use of RRF grants sets out six key strategic objectives. The first is a set of projects to address climate neutrality through enhanced energy efficiency, clean energy, and a circular economy. Related to this, the second objective is to address carbon-neutrality by decarbonising transport. Then the plan includes a strand of initiatives to foster a digital, smart, and resilient economy. Given the lessons of the pandemic, the fourth objective is to strengthen the resilience of the health system. To facilitate the transformation of the economy and enable the digital and green revolutions of the coming decades, the plan then envisages measures that will enhance quality education and foster socio-economic sustainability. Finally, the sixth pillar of the plan is a renewed focus to strengthen our country’s institutional framework.

The environment-related pillars will be granted €189 million. To give some perspective, last year the Government’s capital expenditure on environmental protection amounted to €54 million. We are talking therefore of the equivalent of three and a half times our normal spending, on top of our usual spending. The plan envisages the renovation and greening of public buildings, including hospitals. Malta will build a near-carbon-neutral school that will serve as the model for future such buildings. The public service fleet will be decarbonised, while new electric buses will be introduced.

Malta will build a near-carbon-neutral school that will serve as the model for future such buildings.

Besides this green revolution, the plan sets out a plethora of measures that will digitalise our public services and our society. The health system will be a major beneficiary, with investments in the outpatients and pathology functions, with funds allocated being more than the equivalent of a normal year’s capital allocation. Besides this, the remote working backbone for the public service will be revolutionised, while enabling more services to be offered to citizens online. The impact on reducing bureaucracy for businesses will be a key contribution, while investment grants will support similar efforts on the part of the private sector.

The education sector will see a grant allocation that will again be equivalent to more than its usual annual capital expenditure allocation. With it, efforts to strengthen early school leaving prevention measures will redouble, while skills development and recognition particularly for low-skilled adults will be reinvigorated. The key investment will be the setting up of a centre for vocational education excellence, addressing a key need which stakeholders have been arguing about for decades.

Finally, another €10 million will be devoted to strengthening institutions. The digitalisation of the Justice system will be given a new impetus, while agencies such as the permanent commission against corruption and the asset recovery bureau will build their capacity. More measures will be undertaken to strengthen Malta’s anti-money laundering and combating terrorist financing framework, while further action will be taken to combat aggressive tax planning and reduce possibilities for international tax arbitrage. 

At its peak, the plan is expected to boost our GDP by over €110 million and adding nearly 700 new jobs. Our nation’s productivity will also be 0.6%. But more important than these economic indicators will be the immense contribution that these RRF grants will have on reducing our society’s carbon footprint. With these funds, we will truly be able to start changing the infrastructure of our economy and turn it into a foundation for a more sustainable way of living. The digital transformation of our public services will not only make life easier for families and businesses. It will serve as new source of demand for our digital workforce, honing its skills further and building a new economic niche that enhances our diversification.

This plan is another example that Government’s very ambitious economic vision is realistic and can be achieved if all stakeholders act together for the interest of our country.

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