‘No need for big surplus’, says Scicluna, Budget set for 22 October

Finance Minister Edward Scicluna says target is to maintain a balance in government budget and manage economic expectations

The government's focus is to now manage Malta's economic success, Finance Minister Edward Scicluna said
The government's focus is to now manage Malta's economic success, Finance Minister Edward Scicluna said

The government's target is now to manage Malta's expectations and its economic success, Edward Scicluna said, as he announced that the Budget for 2019 will take place on 22 October.

Addressing a conference this morning as part of a pre-budget consultation process, the Finance Minister said the government's view is that it was now "not really after a big surplus."

"A balanced budget would be satisfactory now - we don't need a big surplus, and whateve extra revenue comes, we want to spend and redistribute," he said.

"My target is that the surplus would amount to whatever the Individual Investor Programme scheme's revenue is for that year - but also that when we net this out, the government's budget would remain in balance," he elaborated, "So we want to obtain a balance and even a small surplus, regardless of the IIP scheme."

Scicluna emphasised the importance of being "watchful" now that the economy is doing well, and cautioned that taking the success for granted could lead to serious problems.

"I don’t think we should ever be fed up of economic growth. We cannot take it for granted – it has to be closely observed and interpreted, and this is what we’re going to do," he said.

He said that growth did not need to be "fanned needlessly". "The economy does not need any stimulus at the moment. Every measure has to be done with a purpose," he underlined.

The statistics show that we are moving forward, he said, with each budget being an amelioration on the previous one.

Some inflation necessary

Regarding inflation, Scicluna highlighted that a healthy economy should not have a 0% inflation rate – it should have a rate of up to around 2%.

"In terms of what brings inflation up – the addition to the labour force of labourers from abroad is the reason why our inflation rate is what it is," he said.

"A country’s economy could not grow with a tight labour market – it would have touched the ceiling and gone down."

"Our economy does not have to grow at rates of 8% each year, but even if the rate is 4%, we will require certain additions to our labour force, which at the moment stands at around 200,000, and is increasing at a steady, constant rate," he added.

Material deprivation and social exclusion rates down

From a high of 20%, the material deprivation rate now stands 8%, Scicluna pointed out. The social exclusion rate has also fallen from 24% in 2013 to around 19% today.

In a pre-budget document issued today, the government said it remained committed to continue improving the income of pensioners, following a 25-year period in which no pension adjustments were made.

Regarding rental prices, the document notes that various proposals to address the new challenges presented by both rental prices and property prices will be put forward in a White Paper to be published for public consultation. It adds that the government is investing around €50 million to build around 700 additional social housing units, with this being the first phase of a more extensive programme over the next few years.

 

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