The Finance Minister Tonio Fenech told Parliament that the economy had done well in 2008 and only started experiencing difficulties in the third quarter.
GDP registered a three per cent growth and it is envisaged that, for 2009, the economic growth would reach 2.5 per cent. The European Commission has set the forecast for Malta for 2009 at two per cent.
According to the Commission's forecasts published yesterday, Malta will be seeing an economic slowdown in 2009 along with the rest of the euro area, even though its magnitude should be less than that predicted for the Eurozone.
The Commission's biggest concern, however, is on the state of public finances where it said that the deficit ratio is estimated to increase to 3.8 per cent of GDP from 1.8 per cent this year.
Between June 2007 and June 2008, the labour supply increased by 2,950. The number of gainfully-occupied went up by 3,426 with the private sector expanding by 4,014 and the public service shrinking by 588 workers.
The self-employed grew by 240 and the registered unemployed decreased by 476. Total part-time employment increased by 2,594.
Direct foreign investment between January and June was €283 million, down by €46 million on the same period last year.
Mr Fenech said the rate of inflation in September was 3.73. According to the established mechanism, the cost of living increase should be €6.41. Since in the previous budget, the government had anticipated an increase of €2.33, therefore the COLA announced in yesterday's budget was €4.08.
For the second consecutive year, pensioners would benefit from the entire cost of living increase.
The government aimed at balancing the budget by 2011, a year later than planned because of the economic scenario. The deficit for 2009 is expected to be €98.8 million.
The minister said that with prudence and responsibility, the government was taking measures and initiatives to reach its economic goals and growth.
It plans to invest €322 million in infrastructural works; €112 million in environmental projects; €362 million in education and training; €30 million in alternative energy and €64 million in incentives to industry, including tourism.