The Budget for 2019 presented by Finance Minister Edward Scicluna last Monday is a reflection of a robust economy and sound public finances. Malta remains one of the best performing economies in Europe: the economy grew by 6.7 per cent in real terms in 2017, by 5.4 per cent in the first six months of 2018 and is forecast to grow by 5.3 per cent in 2019.
For the third consecutive year the country is expected to enjoy a budget surplus in 2019 while the 2018 debt-to-GDP ratio is estimated to be 46.9 per cent and that for 2019 is forecast at 43.8 per cent. Unemployment stands at 3.8 per cent.
These positive figures enabled the government to introduce a number of good social measures in the Budget such as the granting of an additional day of leave, an increase in the minimum wage, another tax refund for those earning under €60,000, an increase in the children’s allowance, an increase in pensions, the retention of the annual €300 grant to persons aged 75 or older who live at home and an increase in the maximum tax deduction for parents of children at independent schools.
Most of the above measures strengthen the country’s safety net and increase disposable income, and are therefore to be welcomed, especially in view of the fact that the gap between the haves and the have-nots in our society appears to be widening. Unfortunately, no funds were allocated to help migrants integrate into society, risking the creation of a permanent underclass, which is in nobody’s interest.
Wealth distribution alone, however, is not enough to achieve social mobility. It is evident from the latest EU figures – showing Malta top for early school leavers – that considerably more needs to be done to improve our educational system. The budget failed to give this sector enough emphasis. The government does not have its priorities right when it makes future economic growth dependent on an ever increasing flow of foreign workers while many of our younger nationals remain unqualified.
The government’s intention to bring in an additional 70,000 foreign workers – in a country which ranks seventh in the world in terms of population density – will no doubt put a huge strain on our infrastructure and result in even higher property prices. And herein lies the main fault of this Budget: the lack of long-term vision needed to address many of the country’s challenges: our infrastructure, heavy traffic, overdevelopment, shrinking environment and major surge in property prices.
The Budget did not address the country’s huge traffic problem. Granted, the government announced that it is to spend €100 million on roadworks, which might go some way, in the short term, to easing the congestion. But it only means that the country is planning to accommodate more cars on our roads – which according to the latest NSO figures have gone up by 40,000 in three years, reaching 383,000.
What the government seriously needs to be thinking about is reducing that number. The obvious solution in the long term would be the introduction of a modern and efficient public transport system such as a monorail or a metro. This would require a long-term plan, the sourcing of EU funds and a clear and defined timeframe.
A declaration in the Budget in favour of seeking high value tourists, instead of huge numbers, coupled with an intention to improve Malta’s overall product, would also have been welcome. Tourism, we all know, is a major pillar of Malta’s economy but the island is bursting at the seams and looks to be nearing the limits of its absorption capacity.
Regarding the environment, the planned waste-to-energy plant and the beverage bottle deposit returns scheme are positive measures. However, this was hardly a Green Budget: the government signalled no intention at all to move away from its blatantly pro-construction industry model and to adopt a more balanced approach in favour of the environment and residents. Nor did it move away from its ridiculous support for mega high-rise projects which nobody except the developers’ lobby are in favour of and which is turning parts of Malta into a soulless concrete jungle.
The Budget includes some measures aimed at helping first-time property buyers and buyers aged over 40, as well as a planned increase in social housing units and the widening of rent subsidies. These are welcome, but the government needs to come to terms with the fact that a population surge (through a foreign influx) and the approval of so many mega projects inevitably leads to large increases in property prices, which the government can do little to curtail.
Prof. Scicluna also promised 45 anti-money laundering initiatives which will be implemented over the next three years to further strengthen Malta’s regulatory and supervisory institutions. This sounds good, especially in view of Malta’s poor global image as a result of its sloppiness in the implementation and enforcement of anti-financial crime regulations.
The crucial test, however, will be whether autonomous regulators will be allowed to ensure that the law is respected by all operators. Based on this government’s record, there isn’t much cause for optimism.
This is a Times of Malta print editorial