Yesterday the Leader of the Opposition started his reply to the Budget 2022 by declaring that the state of Malta’s finances is “very worrying” and that Government is concealing the real situation.
It is strange that Bernard Grech chose this negative argument as the basis for his speech. The International Monetary Fund, the European Commission, the Central Bank & credit rating agencies all disagree with Bernard Grech’s assessment, as they revised their economic projections on Malta in recent months.
In fact, August marked the first surplus ever recorded since Robert Abela became Prime Minister, and therefore, since the start of the pandemic. With a surplus of €129 million in the Consolidated Fund, this was the third best government financial result observed during the month of August in Malta’s history, and a clear sign of Malta’s post-pandemic economic recovery.
This recovery was also noted in IMF’s recent Article IV report about Malta, which stated that “consumer and business confidence have recovered…and signs of labour markets tightening are emerging. Staff expect the economy to grow by around 5¾% in 2021 and 6% in 2022”.
The main problem with Bernard Grech’s negative assessment is that it does not resonate with the general public because it’s the complete opposite of what Maltese families feel.
The IMF, the European Commission, the Central Bank & credit rating agencies all disagree with Bernard Grech’s assessment
The recent European Commission household survey shows that the Maltese are the most confident in the EU. In fact, a majority of 22% of Maltese households believe that the economy will grow over the next year. This contrasts with the EU average of 5% more people expecting their national economy to worsen. Moreover, a majority of 7% of Maltese households believe that their financial situation will improve. This is 6% more than the EU average.
In his speech, the Leader of the Opposition said that he can’t understand how the Government is projecting an increase in VAT revenue. This brought back memories of last year’s speech in which he called the Government’s projections “a virtual reality”, arguing that there was no way that revenue could rise as was forecast.
That virtual reality turned out to be real as Government recorded a deficit improvement in its Consolidated Fund of €169 million in the first seven months of this year when compared to the same period a year ago.
In fact, despite the pandemic and the restrictions it has brought, government revenue increased by half a billion, compared to last year.
The Leader of the Opposition then asked how will the Budget help the elderly and most vulnerable. To begin with, it’s worth noting that next year, Government will invest €1,212,984,000 in social benefits, the biggest spend in Malta’s history. Pensioners, persons with disability and people on low income, are the most affected by Budget 2022, with some pensioner couples seeing an increase in income of more than €1,000.
Yesterday’s speech, which by the end turned into an electoral manifesto launch, showed that on the most important subject in politics, the economy, the Opposition has not yet found the expertise to provide a solid and credible alternative.
On the other hand, the Labour Government’s progressive recipe to increase government spending by investing in people in times of recession and move away from austerity has clearly worked.
Rather than firing baseless criticism which exposes the Opposition’s limitations on the economy, Bernard Grech could have taken a more sensible route that would have been to support this last Budget of the legislature and direct his MPs to vote in favour.
But maybe that would be asking too much.