The Budget belongs to us all
Minister of Finance Tonio Fenech last Wednesday presented what should be the last Budget of this legislature. Whether it will eventually be approved by Parliament is another matter and is essentially a political issue. However, there should be no doubt that the Budget belongs to us all.
It represents a link between the past year and the year to come. It reflects the fiscal policy of Government for the coming 12 months, based on the performance of the economy in the last 12 months.
Moreover, the revenue that the Government collects comes from the taxes we pay and the measures that will be taken are meant to meet the needs of the common good.
The Budget should also represent a time of reflection. The massive amount of data that is published in the Economic Survey, which is submitted to Parliament together with the Budget, gives rise to a series of assessments on the current status of our economy and our past economic performance.
In effect, it places the Budget in a local and international context and it would be more than pertinent to assess whether our economy has performed well enough, given that context.
This is the fifth successive Budget that the Government is presenting against a backdrop of a very difficult international economic situation.
The eurozone and the wider EU are both expected to experience negative growth of around 0.3 per cent. The Organisation for Economic Cooperation and Development has warned of the possibility of a global recession of serious proportions.
On the other hand, Malta’s economic growth this year is expected to be around one per cent, and for the next year, the estimate is of 1.6 per cent. Although comparisons may indeed be odious, one cannot but note that, excluding the countries that used to form part of the former Soviet Union’s bloc, Malta’s economic growth rate is surpassed only by Sweden. Thus we are performing rather well against a scenario that cannot get much worse.
This is confirmed by positive data on employment, with over 151,000 persons in a job, with the growth coming from the private sector.
Our unemployment rate is the fifth smallest in the EU, at 6.5 per cent. Exports have shown an increase of 33 per cent over last year. Our average income tax rate is the lowest in the EU. Expenditure by tourists has gone over the €100 million mark, 33 per cent higher than it was in 2009. To cap it all, the EU has decided not to continue with proceedings against Malta for its level of the fiscal deficit; thereby implying that the deficit is within sustainable proportions.
This may lead one to think that our economy is out of the woods. It is not. We have achieved all this because we have been capable of managing our economy well.
The private sector has continued investing; wage demands have been kept to sustainable levels; and the Government has provided an environment where we have maintained the self-confidence in ourselves to overcome the economic challenges that we have been facing in the last five years. This is why the Budget belongs to us all.
The same prudence that was adopted in past Budgets has been maintained also for next year’s Budget. The fiscal deficit for this year is expected to reach 2.34 per cent while next year it is expected to reach 1.74 per cent.
The measures announced in the Budget are not out of this world; but they give a sense that the good direction that has been evident in the last years will be there also next year.
A number of measures already set in motion are expected to reach completion in the coming months, or are being extended to ensure that more companies and individuals benefit from them.
Thus, the private sector across the board is expected to benefit from one form of programme or another, all aimed at incentivising investment and employment. Initiatives aimed at encouraging innovation and start-ups are being put in place.
Training and education shall also be given a further boost.
There are also a number of measures aimed at giving a stimulus to the housing market as well as providing support to families who are buying their first or second home.
The social sector shall also be experiencing an increase in financial resources.
One particular measure that is particularly noteworthy is related to Valletta. Apart from the continuation of projects aimed at enhancing the cultural heritage in our capital city, there will also be incentives for the opening of boutique hotels. This needs to be viewed from the perspective that in 2018, Valletta will be the Cultural City of Europe.
Someone might ask: “But where is the big project? All this may look like more of the same.”
My answer to that is another question: “Does prudence require a change of course? Does our economic performance require a different approach?” Yes it does look like more of the same but it does ensure we remain on the right path.