The European Commission this morning predicted that Malta will continue to have an excessive deficit of more than three per cent of GDP next year.
That view contrasts with government projections that the deficit will actually slip to 2.7 per cent this year and 2.1 per cent next year.
In its autumn economic forecasts, published this morning, the EU executive said that contrary to the Government’s projections, it was forecasting an actual increase in the island’s deficit to -3.5 per cent by 2015.
Its projections were made before the presentation of the Budget yesterday.
According to the Commission, Malta’s debt levels were also predicted to grow further, from 72.6 per cent of GDP this year to 73.3 in 2014 and 74.1 in 2015.
“After having widened to 3.3 per cent of GDP in 2012, on account of slippages in current expenditure, the deficit in 2013 is expected to increase slightly to 3.4 per cent”, the Commission said.
Stating that the Commission’s projections were made prior to the presentation of the budget, the EU executive said that “on a no-policy-change assumption, the structural deficit is expected to deteriorate by 0.5 per cent of GDP in 2015, as the headline deficit does not improve in a context of actual GDP growth exceeding its potential.”
The Commission said that “the debt-to-GDP ratio is projected to continue increasing over the forecast horizon, as the primary balance remains insufficient to allow a reduction in the debt ratio.”
According to Brussels, Enemalta is the main risk Malta is facing due to its financial situation “which could entail additional subsidies.”
At the same time, the Commission is predicting stable economic indicators.
“Real GDP is forecast to grow by 1.8% in 2013 as a whole, up from 0.8% in 2012.”
A number of structural reforms, most notably in the energy sector, are likely to drive down industry costs if properly and timely implemented, and strengthen the medium-term growth outlook
“A number of structural reforms, most notably in the energy sector, are likely to drive down industry costs if properly and timely implemented, and strengthen the medium-term growth outlook.”
“Job creation surprised positively in the first half of the year thanks to the tourist sector and the newly emerging, labour-intensive activities in the services sector. These developments have been also supported by ongoing government measures to increase labour market participation of women. Employment growth is projected to moderate slightly over the forecast horizon, but to remain relatively strong at 1.8% per annum, well above the euro-area average. At the same time, the unemployment rate is projected to remain low and to average 6.3%, slightly lower than in 2012.”