Deficit cut by an extra Lm13m

New statistics published yesterday by the EU show that Malta ended the year in a healthier financial position than expected.

According to Eurostat, Malta's structural deficit at the end of 2005 went down to 3.3 per cent of its Gross Domestic Product (GDP), or Lm64 million.

Not only is it the lowest structural deficit in the last decade but it is even better than both the EU and the government had projected a year earlier.

The government's estimates, which had been passed on to the EU under Malta's convergence programme for 2005, had predicted a deficit level of 3.9 per cent of GDP, translating into Lm75.9 million. But a better economic performance than foreseen and better fiscal discipline has resulted in a further decrease of almost Lm13 million.

Progress was also registered in the level of government debt which, at the end of last year, reached Lm1,440 million or 74.7 per cent of GDP. Although this is still considered to be very high by EU standards, as the benchmark is 60 per cent, this too is a better result than expected. According to the 2005 budget estimates, the debt should have reached 76.7 per cent of GDP.

A European Commission source told The Times yesterday the Commission had already had occasion to state that Malta was doing a good job in controlling its deficit. However, he reiterated that the deficit target of under three per cent of GDP has yet to be achieved.

Last month, following a meeting of economic and finance ministers, Prime Minister Lawrence Gonzi indicated that the government was expecting better results than projected.

He had told The Times that although the European Commission had concluded that Malta's structural deficit for 2005 had gone down to 3.9 per cent of GDP, the government was analysing new data which could result in a better performance.

According to last month's Ecofin Council, Malta's programme for the next three years is consistent overall with the correction of the excess deficit by 2006.

From a peak of 10.3 per cent of GDP reached in 2003, Malta this year is expected to cut its deficit to 2.7 per cent and is estimating a further reduction to just 1.2 per cent by 2008.

Improvements are also expected in the national gross debt figures which are expected to gradually fall, reaching 67.3 per cent by the end of 2008.