COVID-19 batters public finances, leaves economy just above the surface

Malta’s economy remained just above the surface in the first three months as the COVID-19 pandemic wreaked havoc, figures out today show.

The economy grew by 0.5% between January and March, remaining in positive territory, even though at a much-reduced level than previous quarters. In the last quarter of 2019, the economy grew by 4.8% and before that by 3.7%.

The National Statistics Office today released figures for economic growth and public finances that showed how these were conditioned by the coronavirus crisis.

With disruptions to economic activity and travel coming into force in the second week of March, the country experienced an unprecedented situation that saw many companies lose all their income. Restrictions only started being lifted gradually in May.

The NSO figures show drops in household consumption and exports, which were partially mitigated by higher government expenditure and higher imports. This kept the economy floating in positive territory.

However, a different set of statistics covering public finances between January and April, showed how the country registered a whopping deficit of more than €600 million. This was €463 million more than the same period last year.

The deficit was a combination of lower revenue and higher public expenditure as a result of the COVID-19 situation.

Government allowed companies to defer tax payments to ease cash flow problems caused by loss of income, but it also invested millions in wage support measures and other benefits to mitigate the impact of COVID-19 on families.

The NSO said that recurrent revenue decreased by €220 million with reductions across all tax and income streams.

Between January and April recurrent revenue totalled €1.2 billion, a 15.9% decline over the same period last year.

Expenditure increased by €243 million during the period, reaching €1.8 billion. This represents a 15.9% increase from the corresponding period in 2019.

“Decreases in revenue and increases in expenditure reflect developments related to COVID-19,” the NSO said.

Scicluna hails resilient economy

The figures were welcomed by Finance Minister Edward Scicluna, who said economic growth managed to remain in positive territory despite the global pandemic.

He said Malta fared quite well when compared to the EU and Euro Area averages. According to Eurostat, during the same period, the EU economy contracted by 2.6% while the Euro Area recorded a drop of 3.2%.

“As predicted by the IMF, the EU and the credit rating agencies, the Maltese economy was hit by the COVID-19 pandemic at a time when it was well diversified, resilient and with enough fiscal space to combat the crisis with confidence. We augur that we will continue to minimise our inevitable losses,” Scicluna said.

He added the government was determined to continue providing the required support to all affected sectors while pushing towards a successful and quick recovery.