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Updated: Malta's economy on track - minister

Video: Mark Zammit Cordina

Malta does not need to take any additional measures to continue lowering the deficit, keeping it under the three per cent mark, Finance Minister Tonio Fenech said this afternoon.

Giving his reaction to the European Commission’s forecasts earlier today, the minister Malta would have the sixth largest economic growth and the fifth lowest unemployment rate in the EU.

Although this was very good news for the country, it had to continue to be diligent. However, because of the various measures the government had already launched, the country’s finances were sustainable.

The European Commission said this morning that economic growth this year slowed down when compared to last year but Malta’s economy was still expected to perform better than the euro area average.

The forecasts shows that while the euro-area economy is currently in a mild recession and is expected to contract by -0.3 per cent of GDP by the end of 2012, Malta’s economy is expected to grow by 1.2 per cent of GDP by the end of this year, with a stronger recovery of two per cent forecasted for 2013.

The Commission’s economists also made positive forecasts on other key economic indicators for 2012, with inflation predicted to remain stable at two per cent, lower than the euro area’s (2.4 per cent), and an increase in both exports and imports.

On the other hand, the Commission is forecasting a slow down in tourism activities when compared to last year’s record year and subdued employment growth of 0.6 per cent compared to 2.4 per cent in 2011.

With regards to government finances, while acknowledging Malta’s success in reducing the deficit last year, Malta is this year expected to continue to lower its deficit to 2.6 per cent of GDP. On the other hand, the island’s debt is projected to reach 74.8 per cent by the end of this year – an increase of 2.8 per cent on 2011.

According to the Commission, “the deficit and debt outcomes could be higher, given risks to expenditure from the on-going restructuring of Air Malta, the expected renewal of the public service wage agreement and the financial situation of Enemalta.”

Asked about Enemalta’s debt, Mr Fenech said that the government would create a special purpose vehicle for Enemlata to pay back its debt and return to sustainability.

The long-term plan, he said, was to switch the new Delimara extension to gas.

Asked about the construction industry, the minister said that developers needed to look at the quality of the property they offered.

They should provide quality office space which was needed for online gaming companies, back office companies and other service providers being attracted to Malta.

The industry needs to study better the opportunities out there, he said.

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