The Maltese Government is delivering on its promises to rein in the deficit below 3% while also addressing the country’s main shortcomings, as identified by in its Country Specific Recommendations, Finance Minister Prof. Edward Scicluna assured European finance ministers.
Prof. Scicluna was addressing Eurozone Ministers on Monday 10th March 2014, where he delivered a report on Malta’s economic progress during his participation in Eurogroup and ECOFIN meetings.
Prof. Scicluna recalled that early last year, Malta was placed in an excessive deficit procedure as a consequence of the fiscal slippage registered during 2012, which saw the deficit rise to 3.3% of GDP. At that time Malta’s GDP was slowly growing at less than 1%, he added.
“What I asked in my bilateral meeting with Commissioner Olli Rehn was to give the new Government the opportunity to address the situation in its own way, by carrying out a much-needed spending review, and initiate a number of reforms to address the main hot-spots identified in Malta’s CSR’s. In his letter to me, Olli Rehn thanked me for my firm commitment,” Prof. Scicluna noted.
Prof. Scicluna noted that the Government’s ambitious target deficit was to close 2013 below 3%. This is in spite of how both the Spring and subsequently the Autumn Commission forecasts continued predicting a 3.7% and then 3.3% deficit respectively.
“We kept level-headed, knowing that the number of reform decisions taken were having an effect on the economy, which surfed to annualised growth of 3.3% in second quarter, 2.3% in the third quarter and an overall estimated growth for the whole year of 2.4%,” Prof. Scicluna said.
The Finance Minister added that, at the same time, the spending review initiated by the Government on one side, together with revenue outcomes as projected, meant that monthly Government reports showed that the public finances were, and still are, on track.
Furthermore, the Minister noted that by December 2013, the Treasury had reported that on a consolidated fund level, the deficit had declined to 3.1% of GDP.
“In view of a number of advance payment and accruals we are confidently expecting that the general Government balance in ESA terms will reach a figure well below the 3% threshold,” Prof. Scicluna said.
He also noted with satisfaction that the recently-published Commission Winter Forecast suggests that Malta would end 2013 with a deficit of 3%, “a second downward revision which shows the Commission’s observed improvement in our public finances in the first of the two year time frame given to us.”
Similarly, he was pleased to note the Commission’s conclusion that “the macro economic challenges no longer constitute substantial macroeconomic risks and are no longer identified as imbalances”.
Prof. Scicluna assured Eurozone members that the Government has no intention downplaying the number of risk factors which tend to affect any economy, and that the Government will continue remaining vigilant and push forward the number of reform measures.
Prof. Scicluna also informed Eurozone members that, as announced in the past approved Budget for this year, first in line will be the soon to be approved in Parliament of the Fiscal Responsibility Act which foresees the setting up of Malta’s first Fiscal Council.
He added that further reforms include reforms in the energy sector, which will see Malta diversifying away from its past total reliance on oil and the part privatisation of our energy corporation (Enemalta).
“This is expected to reduce Malta government contingent liabilities by a third and reduce the cost of energy to increase competitiveness,” Prof. Scicluna said.
– Tuesday, 11th March, 2014