The Budget has ignored the European Commission's warning, projecting a higher deficit next year even though the economy is expected to grow only marginally by 1.1 per cent.
At €233.8 million the deficit in 2010 is projected to hit the 3.9 per cent mark. This is marginally higher than the deficit for this year, which is expected to be 3.8 per cent or €217.6 million.
Next year's deficit projection is, however, still much lower than that of other eurozone countries such as France, expected to register a deficit of 8.2 per cent, the Netherlands 6.1 per cent and Spain 10.1 per cent.
This year's deficit will be almost €119 million more than what had been projected. The Finance Minister explained that €90 million were linked to the shipyards privatisation and an increase in the health sector's budget.
Apart from this extraordinary increase in expenditure, the deficit was also negatively hit by lower revenues. Although income from direct taxes is expected to be €22 million more, lower receipts, particularly from VAT and customs resulted in a total drop of almost €13 million in the tax take.
The deficit is only expected to go below the three per cent mark in 2012, when the government is forecasting a deficit of 2.9 per cent. In 2011 the deficit is expected to start decreasing at 3.2 per cent.
Significantly, public debt next year is projected to increase to 69 per cent of gross domestic product up from the 67 per cent this year.
While the economy is expected to register negative growth of two per cent this year, the government is forecasting marginal improvement for 2010 with GDP entering positive territory at 1.1 per cent. However, the government does not seem too optimistic about the new job prospects a recovering economy is expected to create, insisting unemployment will only "drop marginally".
The budget proposes no tax cuts except for the removal of the credit card levy on January 1, which will result in lost revenue of €2 million. Another incentive is the reduction in licences and registration tax for boats, which would cost the government €150,000 in lost revenue and benefit some 16,000 people.
The only revenue raising measure is the increase of the duty on cigarettes, which will see a packet increase by 15 cents. This measure will generate €3.7 million for public coffers.
The budget does not propose any significant expenditure cuts, with the more controversial proposal being the withdrawal of government funds for the Malta Environment and Planning Authority, which is expected to self-finance its operations through a revised tariff structure.
No indication was given of the new charges for Mepa-issued permits or when these are to come in force.
The government will emphasise tighter control on expenditure and fewer workers will be employed to replace the number of public sector employees leaving the service because of resignations or retirement. This action will reduce public expenditure by around €10 million.
As expected the cost of living adjustment for 2010 will be €5.82 per week and in line with the policy adopted over the past two years pensioners will also benefit from the full increase.
Indicator: GDP
2009: -2%
2010: 1.1%
Indicator: Deficit
2009: -3.8%
2010: -3.9%
Indicator: Debt
2009: 67%
2010: 68.7%
Indicator: Inflation
2009: 2.5%
2010: 2%