The European Commission, as expected, recommended today that the EU's Council of Ministers should close the Excessive Deficit Procedure (EDP) for Malta and Poland.

With regard to Malta, it noted that the general government deficit was reduced to 2.1% of GDP in 2014 and is forecast to remain 3% of GDP in 2015-16.

Malta has also complied with the debt rule in 2014, a necessary condition for exiting the EDP given that the procedure was based on the breach of both the deficit and the debt criteria.

The Commission said economic growth is projected to remain robust, supported by strong domestic demand. Labour market gains have been the main driver for growth in recent years. Investment has 'stagnated' after being a prominent driver for growth in the first half of the past decade.

Price inflation is projected to remain moderate in historical terms, but still higher than the average in the euro area.

Despite the challenging external environment and the high import-intensiveness of domestic demand, Malta’s exports continued to outpace imports and the net external position is expected to have improved over the past year.

Malta's budgetary performance over the past decade exhibited varying trends, with some expenditure overruns, but government finances do not appear to face sustainability risks in the short term, the Commission said.

COUNTRY SPECIFIC RECOMMENDATIONS

The European Commission urged Malta to:

Achieve a fiscal adjustment of 0.6 % of GDP towards the medium-term objective in 2015 and 2016.

Take measures to improve basic skills and further reduce early school-leaving by
promoting the continuous professional development of teachers.

Accelerate the increase in the statutory retirement age and link it to life expectancy.

Improve small and micro-enterprises’ access to finance, in particular through
non-bank instruments.

See report on pdf below.