Dalli forecasts 3-4 per cent economic growth

The budget deficit for this year is likely to be significantly higher than the Lm75 million projected by the government in the last budget. If the current situation persists, it is possible the government will end the year with a budget deficit in excess of Lm100 million.

In his budget for 2003, presented last November, Finance Minister John Dalli had said that the budget deficit for this year was expected to be 4.1 per cent of the Gross Domestic Product.

However, in a news conference yesterday, Mr Dalli said that revenue was short of what had been projected and that the government could end its year with a structural deficit of up to seven per cent of the GDP.

Mr Dalli said there was a substantial variation between the projected and actual revenue though he said the government was working hard to manage and improve the situation.

Mr Dalli also said that if the present situation persists, government revenue this year could be up to Lm25 million short of projected levels.

"This does not mean we have seen a drop in the government's revenue. The revenue is increasing but not as much as projected. We are working hard and doing our utmost to manage the situation."

Mr Dalli reaffirmed his belief that the economic outlook for the second half of the year was positive. "There are clear positive indicators for the second half of this year. It is clear that the uncertainty over EU membership and the issue of the election have left their mark. Now the country is moving and the economic rhythm is increasing. I estimate an economic growth of three to four per cent over this year."

Mr Dalli said that over the first six months of the year the Malta Development Corporation had approved projects expected to employ 1,700 people and generate investment of more than Lm20 million over the next three years.

Investment in the country in the first quarter increased by 10.2 per cent in real terms.

Mr Dalli said the situation with regard to unemployment had stabilised and there were indicators which suggested that fewer people were seeking employment.

The inflation rate had dropped to 1.3 per cent, exports for the first four months of the year had increased after drops had been registered in the past two years and tourism figures for the first five months of the year were positive.

Mr Dalli said there was a need for the economic players in the country to be innovative. There was also an urgent need for structural changes to take place, particularly in areas such as pensions, health and the environment.

The minister is expecting to conclude the privatisation of the public lotto and the MOBC by the time the budget for 2004 is presented.

Privatisation of Malta Freeport was literally "at a crossroads", Mr Dalli said.

Figures released yesterday by the National Office of Statistics showed that the structural deficit in the first six months of the year amounted to Lm113.7 million, an increase of Lm35.7 million from a shortfall of Lm78 million for the same period last year.

Mr Dalli said it would be very difficult for the government to reach its target of reducing the deficit to Lm75 million. The deficit for the first six months of the year had exceeded Lm100 million, which is over eight per cent of the GDP.

However, he said the government's monthly revenue was not indicative of the annual situation as such revenue was not spread out evenly month by month.

Mr Dalli said that the projected revenue had not materialised as a result of an economic slowdown that had taken place last year and during the first quarter of this year as a direct effect of the persistent international economic slowdown.

Mr Dalli said he was doing his utmost to implement measures aimed to control government spending, adding that the government was working on a cost-cutting exercise.

He denied reports of imposing a 10 per cent cut across the board in the budget of government department because it did not make sense for many reasons - even though such a measure would have saved the country Lm70 million.

Mr Dalli said there were areas where the government felt the need to increase spending and it had done so. However, he said the government and its departments had to be more disciplined and prioritise.

He also said the government was determined to step up its fight against tax evasion.

Mr Dalli said he was forecasting certain increases in government expenditure. For instance, the government would this year be spending Lm10 million more on the Mater Dei Hospital due to high activity in the project.

He also estimated that the holding of the referendum and the election had cost the government Lm2 million, adding that the government was also spending money in relation to the problem of illegal immigrants.

He said the government had increased its aid to the agricultural sector by Lm2.9 million and the public-private partnership, aimed at improving the image of the country, would cost Lm1.8 million.