Government revenue dropped €150 million below projections last year, with Enemalta accounting for almost half of the shortfall by not transferring €65 million in taxes and duties to the government, Finance Minister Edward Scicluna told the press ahead of the Budget this evening.

He said the government was retaining the Budget as presented by his predecessor and the Budget measures were not being touched, other than a small amendment for minimum wage earners not to be charged income tax.

But, he insisted, the financial picture had changed.

"This is not my Budget, but if I were to give it a name, I would call it A Stocktaking Exercise," the minister said.

"My first Budget will be that of 2014 and I will start talks about it with the European Commission next Friday in Dublin," he said.

He said that the picture had changed because measures announced in the Budget last November had not come into force and the rhythm of the economy had changed. 

Prof Scicluna said that as the then Opposition said last year, the former government was optimistic in its revenue and economic growth projections. 

Malta had ended 2012 with a deficit of 3.3%, a full percentage point higher than projected. From a projected general government deficit of €153 million, the gap had risen to €225.9 million. 

“The EU will not like this, absolutely, it will be very disappointed that a country which was meant to reduce the deficit has seen such big fiscal slippage when it had projected a deficit of 2.3 per cent”, he said.

He explained that the main reason for the slippage was a €150m drop in revenue of which €65m was caused by Enemalta. The rest were drops from duties and social security contribution, while revenue growth from income tax was less than projected. 

Non-tax revenue was down by a further €100m but that did not impact the figures much since related projects were not carried out.

Recurrent expenditure was up €21m more than projected, with a significant rise in non-budgeted spending on various sectors related to Enemalta, such as street lighting. There was also over-spending on areas such as social security and health.

ECONOMIC PERFORMANCE

GDP at constant prices was up 0.8 percent in 2012. Growth slowed in all sectors, except public administration.  

The current account showed a surplus of 0.4 percent from a negative of 0.2 per cent in the previous year.

Malta ended 2012 with a debt of 82.63 per cent of GDP from 70.27 the previous year.

"We can only breathe easy when we put a stop to the growth of the debt, that is a priority," the minister said.

The economy is projected to grow by 1.4 per cent at constant prices this year and 1.6 next year.

FOR THE FUTURE

For the future, Prof Scicluna said that growth-friendly fiscal consolidation would be a priority target.

"We aim to reduce the deficit by 0.6 percentage points per year in structural terms," he said.

"We aim to maintain a primary surplus so that debt dynamics are kept under control. We also aim to pursue fiscal consolidation mainly form expenditure control and we do not plan to raise taxes."

The government also planned to boost public investment and try to reach maximum absorption of EU funds.

"The main challenges are increasing growth potential, sustaining competitiveness, sustainable public finances through institutional reforms and further strengthening of financial stability," he said.

REVISED PROJECTIONS FOR THIS YEAR

For this year, he said revenue would be down by €44m over the projections made in the Budget which was not approved last December. 

Recurrent expenditure would rise by €10 million included  funds for unfunded Budget commitments, new government commitments and revision of projections.

The consolidated deficit would rise by 68 million from projections, to €164, but the deficit as a percentage of GDP would still fall to 2.7% because Malta would not have a repetition of the fiscal slippage it saw last year.