The Prime Minister yesterday hailed the economic vision of the Labour administration, saying it has managed to reduce the deficit to its lowest level in 20 years without resorting to any austerity measures.
Joseph Muscat was reacting to official data published by the National Statistics Office which showed that in 2014, the government deficit had dropped to 2.1 per cent of gross domestic product, in line with the targets set in the 2014 Budget.
A positive trend is also being seen in the national debt, which dropped to 68 per cent of GDP.
Addressing a news conference at Castille, Dr Muscat recalled that in 2014 the government had reduced utility rates and income tax while implementing social measures such as free childcare for all.
“The name of the game is economic growth,” the Prime Minister said with reference to the government’s economic vision.
The positive news comes as the European Commission is set to decide whether to recommend ending the excessive deficit procedure opened by Brussels against Malta shortly after Labour was elected two years ago.
The name of the game is economic growth
Such a decision would need to be formally endorsed by European finance ministers in July.
Asked whether he was confident that this procedure would be lifted, the Prime Minister said his government had satisfied the criteria set by Brussels.
He declined further comment, saying that ultimately it was the Commission that had to make the call.
The NSO said the government ended 2014 with a deficit of €168.3 million, which was €26.1 million lower than the previous year. General government debt in 2014 amounted to €5,417 million, an increase of €176.2 million over 2013.
This year, the government is aiming to go a step further and reduce the deficit to 1.6 per cent. Finance Minister Edward Scicluna said the government’s plan was to push it down further in subsequent years.
However, the Prime Minister is against setting a fixed deadline to achieve a balanced budget, saying recent experience showed that long-term targets beyond the government’s five-year term were bound to fail. Former Prime Minister Lawrence Gonzi had made a pledge to achieve a budget surplus by 2010 but subsequently blamed the financial crisis when his government fell short of the target.
“Eventually we will have to move in that direction, but at this moment our target is to adhere to the stringent EU rules. It would be a pyrrhic victory to balance the books at the cost of stifling the economy,” Dr Muscat said.