On May 31, the Malta Fiscal Advisory Council (MFAC) presented its assessment of the fiscal forecasts contained in the Update of Stability Programme 2018 – 2021, published by the Ministry for Finance on the same day.
The council notes that the fiscal balance is projected to record surpluses ranging between 0.9 per cent of GDP and 1.1 per cent of GDP for the period 2018 to 2020, and of 1.6 per cent of GDP in 2021. The council considers these projections to be within its endorsable range. Likewise, the anticipated steady decline in the debt-to-GDP ratio, from 50.8 per cent in 2017 to 35.6 per cent by 2021, is deemed to be plausible.
For 2018, the council considers possible that total government revenue turns out higher than projected, whereas total expenditure could be less than projected. Such developments would result in a fiscal surplus larger than currently anticipated for 2018. On the other hand, according to the council’s assessment, both total revenue and total expenditure may exceed the projections for the period 2019 to 2021.
On balance, the view of the council is that the yearly fiscal surplus could be somewhat less than that planned during the outer three forecast years. This should nonetheless still safeguard the achievement of the planned stream of fiscal surpluses over the forecast horizon.
In the council’s view, the upside risks to total revenue relate to taxes on production and imports, which appear prudent throughout the forecast horizon. On the other hand, in 2018, lower-than-budgeted spending may occur in public investment. For the outer forecast years, the upside risks to spending mainly stem from the fact that the budget allocations, particularly for public sector wages, and spending on intermediate consumption, are targeted to grow at a slower pace than in recent years.
Finally, the council invites the government to remain vigilant with regard to expenditure growth, so as to adhere closely to the fiscal plans as outlined in the Update of Stability Programme 2018 –2021, since any significant departure could pose risks to the attainment of the fiscal surplus and debt targets as outlined in this report.
The full report, entitled Assessment of the Fiscal Forecasts – Update of Stability Programme 2018 – 2021, is available on the MFAC website at www.mfac.org.mt.