Coronavirus economic recovery plan: achieving normality

The recovery plan unveiled on Monday by the government provides a welcome injection of initiative, confidence and cash to try and stimulate the economy.

It puts forward a raft of targeted measures that touch the pressure points that have come under severe stress over the past three months as a result of the COVID-19 pandemic.

It has been the mantra of the Labour government since 2013 to introduce budgetary and social measures that make work pay, encouraging people to work and earn more. And this is also reflected in the recovery plan.

The higher thresholds and increased payments for those on the in-work benefit, plus a €250 bonus, will alleviate the financial burden placed on those with low incomes by the pandemic.

But more importantly, the improved in-work benefit encourages these people to get into employment rather than stay on unemployment benefits.

A significant contribution over the next three months is the €34 million in vouchers, the government will distribute to individuals aged 16 and over. Again, this is an economic measure as much as it is a reprieve for families.

By directing the spending of these vouchers on business activities that ground to a halt over the past three months, government is trying to mitigate the loss of income from tourism.

The government will be pouring ‘money’ into people’s pockets for them to get the economic wheel turning at a time when it remains unclear how the tourism sector will perform.

The plan also includes a reduction in excise tax on petrol and diesel that will make fuel 7c per litre cheaper. This is welcome news for motorists, although the reduction comes directly from government coffers rather than from a lower price charged by Enemed for its products.

But the biggest part of the recovery includes generous measures to cushion the impact on businesses that were hit by the pandemic.

One can always argue that the rent and electricity subsidy for businesses are not enough to make up for losses sustained over the past weeks but herein lies the need to find a balance between splurging cash for the short-term and safeguarding the future for all.

For there is a sense of diligence in the manner by which government is casting a wide-enough net to pull everyone up, while ensuring that public finances don’t go irreparably astray.

The economic success of the past seven years has given Malta room to manoeuvre, which means government can resort to debt to finance this recovery plan.

Over the past few years, Malta reduced its debt-to-GDP ratio from over 70% to just over 40%, well below the Maastricht criteria of 60%. This gave the country a breathing space that could be used in this time of crisis.

And what is more crucial is that the financing of this package comes from the country’s own resources through bonds that Maltese people and institutions will invest in.

The plan does not depend on the EU recovery plan, which still has to be approved. Hopefully, with the domestic plan enabling the economy to start walking fast and then go into a slow jog, the EU funds can later be used to start a faster jog and possibly enable it to run.

Now is the time to hope. Malta came out of the COVID crisis relatively unscathed from a health perspective. The health services scaled up their preparedness and people generally obeyed the advice dished out by health professionals. The number of infected people speaks for itself.

Discipline and vigilance will remain important as we go forward to ensure the virus remains under control.

But it is also time to get the economic wheel turning so that jobs are protected, people can earn a decent living and the country can return to a state of normality.

The recovery plan goes a long way to achieve this.