The European Commission yesterday gave its thumbs up to the last government Budget, saying it fell in line with the EU’s stability and growth rules.
The Commission warned, however, of a deviation from Malta’s fiscal commitments in the medium and long term.
Brussels carries out an analysis of every member state’s yearly budget. It found Malta’s to be “broadly compliant with the provisions of the stability and growth pact” and deemed satisfactory its continuing efforts to further reduce the debt and deficit levels.
However, in the medium and long term, it pointed to potential problems in continuing on the right path. Based on its own forecasts, the Commission said that, in 2015, the projected improvement in the structural balance of 0.3 per cent of GDP would lead to some deviation from the required 0.6 per cent of GDP adjustment towards the medium-term objectives.
No concrete measures to ensure the sustainability of the pension system have been put in place
The Commission also said that the growth rate of government expenditure, net of discretionary revenue measures, was expected to exceed the benchmark by 0.9 per cent of GDP in 2015, “a significant deviation” from the set targets. Commenting on reform in areas where it had suggested it, Brussels said Malta had made few efforts.
Regarding ongoing pension reform, it said “so far no concrete measures to ensure the sustainability of the pension system have been put in place”.
According to the Commission, no proposals have yet been discussed by the government to accelerate the increase in the statutory retirement age and link it to changes in life expectancy.
At the same time, the Budget introduced some measures that seemed to address some of the recommendations that were published by the Pensions Strategy Group, “although their impact on long-term sustainability remains to be assessed”.
The Commission commended the setting up of the Malta Advisory Fiscal Council.
In a statement, the government welcomed the Commission’s assessment. Finance Minister Edward Scicluna said the government “has every reason to be delighted that its 2016 budget is compliant, as far as its expenditure, deficit and debt trajectories”.