The European Commission is predicting good things for the Maltese economy over the next two years.
The island’s economy was expected to continue to grow strongly and public finances were forecast to improve, the Commission said in its spring forecast. Brussels is expecting fewer new jobs, though unemployment should remain stable.
Inflation is expected to rise.
The Commission also predicts greener pastures for the EU economy, with growth expected over the coming two years.
While stating that economic activity in Malta “surprised positively” in 2013 – registering a growth of 2.4 per cent – Brussels is seeing sustained progress, with the economy expected to grow by 2.3 per cent this year.
Although it is thought Maltese exports will still perform poorly, this is likely to be compensated by increased private consumption.
“Household consumption is projected to contribute significantly to economic growth in both 2014 and 2015 as positive labour market conditions and a reduction in utility tariffs are expected to have a beneficial impact on disposable income,” the report states.
The Commission warns that the forecasts could be at risk, particularly due to possible delays in building the power station.
It predicts sounder public finances. After reporting a 2.8 per cent deficit by the end of last year, 0.5 per cent below 2012, the Commission is expecting it to drop further to 2.5 per cent of GDP.
“The implementation of the 2014 Budget is expected to boost revenue through increases in indirect taxation [mainly excise duties], a new programme to grant Maltese citizenship to foreign individuals and families against the payment of a fee and investments in the country and the introduction of a new tax regime for rental income.”
Improvement is also expected in the island’s debt levels, which are projected to decrease by two per cent to 71 per cent in 2015, following the repayment of an Air Malta loan and the partial clearance of some tax arrears from Enemalta.
Malta’s cost of living ‘is projected to gradually rebound’, driven by higher prices for services and food
Higher inflation is the only negative aspect in Malta’s main economic indicators.
According to the Commission, the cost of living “is projected to gradually rebound”, driven by higher prices for services and food.
Welcoming the Commission’s positive assessment, Prime Minister Joseph Muscat said he was not surprised by the predictions.
He noted that Brussels looked favourably at the government’s reduction in energy tariffs. “Had it also taken into account the stability in fuel and gas prices, the results would have been even better,” he added.
In a statement, the Nationalist Party too welcomed the Commission’s stable outlook on the Maltese economy but said the government should take note of the various warnings including about lower job growth forecasts.
The Opposition noted the Commission highlighted an increase in government expenditure on public salaries and said the government should focus on creating more jobs instead of dishing out favours to members of its clique.