“In its Winter Forecast, the European Commission projects a sustained fall in both the deficit and debt ratios, thus boding well for the upcoming Excessive Deficit Procedure decision,” said the Minister for Finance Prof. Edward Scicluna.
The Finance Minister was commenting on the publication of the European Commission Winter Forecast 2015, published on 5th February 2015, which acknowledges the Government’s successes with regard to reining in and containing the deficit, while also reducing public debt.
STATEMENT BY THE MINISTRY FOR FINANCE: DEFICIT AND DEBT FORECAST BODES WELL FOR EXCESSIVE DEFICIT PROCEDURE OUTCOME
Indeed, the Commission remarks that it is expecting that the budget deficit figures for Malta to continue decreasing, to reach rates below 2% in 2016, levels which have not been experienced over the last two decades.
The Commission also confirms that general government debt ratio will decrease to 68.6% of GDP in 2014, and is expected to decrease further to 68.0% in 2015, reaching 66.8% by 2016, thus confirming its confidence in the Government’s fiscal plan.
The Commission also acknowledges that Malta is experiencing “dynamic [economic] growth” and “low employment” in 2014, underpinned by “dynamic investment … and favourable labour market developments”. This amidst the sluggish economic recovery in the EU and the euro area, with annual GDP expected to increase by 1.3% and 0.8% respectively in 2014. The Commission also remarks that these positive developments will persist.
Contrary to the Opposition’s claims that the local economy is being driven by public spending, the Commission remarks that, “private consumption is expected to continue showing strong growth in 2015-16”. This is based on a rise in disposable income “due to falling energy prices and unemployment.” Furthermore, it states that, “wage growth is seen to accelerate … thereby lending further support to aggregate household spending.”
Malta’s labour market is projected to continue to perform well as, “improvements in labour market activity of women” is expected to continue driving employment dynamics. Job creation is forecast to remain robust at around 2% per annum, while unemployment is expected to remain below 6%.
The demand for credit is expected by the Commission to make a stronger recovery, thanks to lower interest rates that could further boost the investment outlook. Furthermore, the Commission also recognises that the ongoing energy reforms could improve the competitiveness of the corporate sector and lower costs for companies, which could result in higher than expected investment and exports.
Increased exports are also expected to be reflected in Malta’s international trade position, where the Commission remarks that Malta’s current account balance is projected to remain in surplus.
Thursday 5th February 2015