The government aims to make history next year when it plans to reach a deficit of 1.6 per cent of GDP, the lowest it will have been in decades.

Finance Minister Edward Scicluna acknowledged the target was very ambitious but he is banking on economic growth of 3.5 per cent.

Higher economic activity is expected to see public coffers grow by €200 million in revenue despite lowering the top income tax rate to 25 per cent for those earning less than €60,000. Government revenue is expected to be higher than €3.5 billion.

Expenditure will weigh in at about €3.7 billion, leaving the country with a deficit of €130 million.

Prof. Scicluna said the deficit target of 2.1 per cent of GDP for 2014 would be reached, although this was also dependent on the signing of an agreement between Enemalta and Chinese company Shanghai Electric.

Inflation next year is also expected to go below the two per cent mark while unemployment is set to edge down to 5.9 per cent.

The government will be borrowing €500 million next year but Prof. Scicluna said this did not mean the country’s debt level would go up.

He said debt as a percentage of GDP was expected to fall to 69 per cent.