Kurt Sansone
Budget forecasts raise doubts
Forecasting how the economy will perform next year is a difficult task but while the government plays the prudence card to reassure everyone that targets will be met, economists disagree on whether it will manage.
“I am very sceptical of the figures presented in the Budget and I can understand now why the European Commission’s forecasts last week painted a bleak picture for Malta,” economist Joe Vella Bonnici said.
In its autumn forecast the Commission said Malta’s economy will grow by 1.3 per cent next year and the deficit will reach 3.5 per cent.
The government has defended its projections that the economy will grow by 2.3 per cent next year which will translate into higher tax revenues without the need to increase taxes.
But Mr Vella Bonnici has his doubts. He pointed out that while the government expected recurrent revenue to increase by €266 million next year, the Budget figures showed a downward revision of €100 million in revenue for this year.
“These are actual figures for this year, not predictions and they are already going haywire,” he said.
The expenditure for this year is also being revised upwards by some €40 million, he added, insisting that the government was simply playing around with figures.
Mr Vella Bonnici said the Budget talked of 2.3 per cent growth next year but a presentation given by the Finance Minister before the speech pencilled in growth at 1.3 per cent.
“The figures are unclear and the Budget was a public relations exercise rather than a prudent exercise in fiscal and economic management,” he said.
Economist Lawrence Zammit was less cynical about the figures presented in the Budget although people he spoke to did get the feeling that the Budget may have been optimistic.
“It looks ambitious and challenging but it is not a risky gamble,” he said, insisting that everything depended on how the European economy fared next year.
“The real economy in Europe is slowing down but as long as it does not go into recession, the targets will be met,” Mr Zammit said, noting that the European Central Bank had just lowered interest rates to stimulate growth.
Malta’s economy, he added, was diverse and this served as a good shock absorber. “Diversity will still be there in 2012 and with the opening of the Libyan market, opportunities to create wealth are bound to arise.”
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Angus Black
Nov 16th 2011, 20:29
During the last Budget deliberations, the PM promised a lower deficit to below 3%. It appears that a deficit of 2.8% will be achieved as promised, and 2011 was no piece of cake.
2012 will be just as hard if not harder, and reducing the deficit further will be challenging, but going by past promises and the delivery of such promises, I would bet that 2.5% deficit will be achieved.
Numbers can be manipulated to every economist's whims. It is when the actual bottom lines are computed, when one could judge whether the numbers on the Budget were realistic or not.
In the meantime, the government, Joe Vella Bonnici, Lawrence Zammit and I are equally capable (not) of predicting what major economic developments will occur in the coming year.
Nathalie Frendo
Nov 16th 2011, 11:28
We seem to be the only eurozone country that has not announced austere measures. Some might think it is good.If only we could afford , yes .What still baffles and worries me is where d we sreally stand? When will we get our cold shower. If it is in the pipeline it is very irrisponsible of the govt. Can we really afford to fork out a billion euro in social benefits?
George Calleja
Nov 16th 2011, 10:06
Unfortunately Maltese economists tend to speak according to their political beliefs, so they are to be taken with a pinch of salt. We do not have apolitical views by independent economists.So we do not know where we stand.
pat muscat
Nov 16th 2011, 09:57
Add some sugar and spice to the numbers and the doubts will be erased. The question is if the targets for the deficit are going to be met, how come our poisonous debt is going to increase in 2012?
Angus Black
Nov 16th 2011, 23:55
pat muscat, as long as there are deficits, there will be public debts. There are 'poisonous debts' made up of throwing money away (in subsidies) and there are benign debts such as one incurs when buying a home, when government invests in health and education. How many millions went towards subsidies, like the shipyards, Enemalta, and other money losing public entities? How much did they add on to the public debt? How many 'golden handshakes' were given away just to get rid of excess manpower in several government-owned entities? How many of such 'handshakes' were negotiated by GWU who would not settle for less?
This government has a record of reducing the deficit year after year and hopes to bring it down to around 2.3% next year and to near zero by 2015. Then and only then can the government start worrying about reducing the public debt.
The problem is that if in 2013, Joseph has his way, forget about the deficit being reduced to zero in 2013. He just has to come good on his promise of reducing our W&E tariffs, remember?
Also, remember that the 'poisonous debt' you refer to is mostly owed to Maltese investors and Maltese banks who quite regularly receive interest which they spend or reinvest in the Maltese economy.
So be careful what you label this type of investment by thousands who snap up every government bond issue. That spells confidence in the government, I might add.
pat muscat
Nov 17th 2011, 13:54
@Angus Black. The entities you mentioned were already there in the 80's and yet debt was insignificant then. Its the PN who has been financial digging holes since 1987, and we have arrived at a point of no return. Yes as long as there are deficits there will be debt, so much so that the PN never managed to balance the budget one single time, and that is why the PPN created this poisonous debt!
Please remember that the crises in Europe is all about debt, wishing on a star that our growing poisonous debt will go away is naive and dangerous. Indeed, there is not one single sentence on debt reduction in the Budget, and what's worse it is expected to grow by an other 40 million euros in 2012; there goes your Gonzi's 'ghaqal'!