Edward Scicluna

Commission Autumn forecast for Malta: Smooth Sailing in Choppy Waters

Deficit under control, Economic growth higher than anticipated and expected to remain strong

The Ministry for Finance welcomes the European Commission’s positive appraisal of the Maltese economy in its 2014 Autumn Forecast, wherein it recognises the robust performance to date, and for the coming two years.

“What I liked most from the various comments was the reference to Malta’s ‘smooth sailing’. It makes me proud to be part of the team under an able skipper,” said the Minister for Finance Prof. Edward Scicluna.

The Ministry welcomes the Commission’s remarks that “the Maltese economy continued expanding at a robust rate in the first half of 2014”and that “annual real GDP growth surprised positively and reached 3.2%, up from 2.5% for 2013 as a whole.” The Commission also expects that “real GDP growth is projected to reach 3% in 2014 and to moderate gradually to 2.9% in 2015 and 2.7% in 2016.

 

 

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The Commission confirms that this encouraging growth was driven by buoyant domestic demand partly stemming from an increase in additional disposable income to Maltese families due to the reduction in energy tariffs. This refutes the argument repeatedly made by the Opposition that the retails trade is declining due to lower disposable income. The Commission is also foreseeing a positive contribution to growth due to the reforms in the energy sector, improving financing conditions and improving business sentiment.

The Commission notes that the lowering of electricity tariffs for industry in 2015 “is projected to keep input costs contained and, in turn, inflation stable, thereby offsetting upward pressure from households’ growing disposable income.” This again confirms Government efforts to make Malta’s industry more price competitive.

 

 

The Commission also confirms the strong employment growth registered in the past year coupled with a low unemployment rate for the same period while it expects this positive trend to persist in the coming two years.

With regards to public finances, the Ministry for Finance notes with satisfaction the Commission’s forecast that the deficit is “under control,” and that it is “expected to improve marginally in 2014 to 2.5% of GDP, from 2.7% in the previous year.” It is also to be noted that these projections were based on a no-policy change scenario given that the Budget for 2015 was not taken in consideration. Nonetheless, the Government remains committed to keep its fiscal targets as outlined in its 2015 Draft Budget.

– Wednesday, 5th November, 2014

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