Reduction in deficit driven by economic growth NOT austerity measures

The Maltese Government has welcomed the European Commission’s recommendation for the European Council to remove Malta from the Excessive Deficit Procedure (EDP).

The recommendation follows Malta’s strong fiscal performance in 2024, with the country’s budget deficit falling to 2.2% of Gross Domestic Product (GDP). This means Malta achieved the fiscal targets agreed with the European Commission significantly ahead of schedule. Moreover, the improvement in the Government’s fiscal position exceeded the commitments originally agreed with the Commission.

According to EUROSTAT data, the average government deficit across the European Union stands at 3.1% of GDP – almost one percentage point higher than Malta’s. This is despite European governments collecting, on average, around €46 in taxes and other revenues for every €100 of national income. By contrast, Malta recorded a deficit of just 2.2%, while collecting less than €35 in taxes and other revenues per €100 of GDP.

Among EU member states recording deficits of 3% or more of GDP – and therefore considered to be running excessive deficits – are Belgium (5.2%), Bulgaria (3.5%), France (5.1%), Croatia (3.0%), Italy (3.1%), Hungary (4.7%), Austria (4.2%), Poland (7.3%), Romania (7.9%), Slovakia (4.5%) and Finland (3.4%). While Malta succeeded in reducing its deficit below the EU’s 3% threshold last year, Bulgaria and Croatia exceeded the limit for the first time.

Malta achieved this outcome despite being the only European country in 2024 not to increase the prices of petrol, diesel, gas or electricity. The reduction in the deficit was driven by economic growth rather than austerity measures. Indeed, the positive fiscal results were recorded despite the Government implementing what it described as the largest tax cut in Malta’s history, benefiting all workers, while also granting substantial increases in pensions and social benefits.

The European Commission also confirmed that Malta’s fiscal position is expected to continue improving in the coming years.