The budget for 2021 found a balance between short- and long-term measures, economists and workers in the financial field told The Malta Independent.
On Monday, the government announced its measures for the budget for next year and has since then received quite a mix of opinions from stakeholders and civil society, with some saying that it lacks vision for the future.
This newsroom spoke with persons working in the economic or financial sectors to get a professional opinion on the matter.
Balance between short term and long term
“The budget encompassed immediate measures that are required for the current circumstances together with a long-term vision,” Financial Analyst Steve Ellul told this newsroom.
He explained that the continuation of the measures that were implemented during the pandemic was indispensable, such as the wage subsidies which provide the peace of mind that entrepreneurs needed. “I also liked the voucher system as it works in Malta due to our size; it is not a clichè.”
He touched on the fact that these vouchers will not be introduced immediately which means that it will probably be implemented when numbers start to dwindle once again which is an important factor.
With regards to the long-term vision, Ellul paid particular attention to what was said in the budget about having a Green Economy. He believes that the budget has the long-term measures to achieve this goal which compliments the PM statement that one of the 5 pillars of this budget was achieving carbon neutrality by 2050.
He noted that having the Malta Stock Exchange issue an attractive package of Green Bonds that can be used to finance projects that promote renewable energy and reduce emissions is a great way to incentivise the private sector to participate in a Green Economy. “I will be looking forward to its implementation.”
Finance Minister Edward Scicluna addresses Parliament with his budget speech on Monday.
Economist and lecturer and the University of Malta Stephanie Fabri also believes that the budget involves a continuation of the short-term measures, and an indication of what we are expecting from a post-COVID economy, while also focusing on the social element.
“The continuation of the COVID-19 measures such as the wage supplement were to be expected and are important. The fact that there were no increases in taxes is also important for businesses and people in general.”
She picked on the VAT exemption threshold which been increased from €20,000 to €30,000 which is a positive move in her opinion – “measures continue to support the property market which at the moment is an important sector for our economy.” Other positive measures she noted include investment in education and upgrading of health facilities as well as the long-awaited Venture Capital Fund which is crucial for propping start-ups and boosting the innovation eco-system.
From his end, Grant Thornton Malta Partner George Vella said that there were more measures that he was expecting from this year’s budget, especially with regards to projects that will allow investors to keep investing in the future.
He said that the budget shows the government’s focus on ensuring tat consumers’ confidence is resorted and supported, however, he wanted to see more efforts into increasing investors’ confidence as well.
Vella also noted that the deficits which the government is projecting for the coming year is higher than he expected which shows that it is pushing as much as it can with its measures while keeping debt under control since the figure being stipulated for 2023 does not exceed 60%.
Not true that budget lack vision
The Malta Independent also asked if they agree with the Malta Employers’ Association (MEA) reaction to the budget, saying that it lacked vision.
Financial Analyst Ellul said that when one can see a balance when they analyse it well and consider where most of the money is being spent, that is, in the Green Economy and sizeable infrastructural projects that will attract new sectors and industries.
“I see a lot of validity in the fact that earmarked projects were not curtailed like what happened in other countries which shows that the government has a vision for where it is headed.”
Grant Thornton Malta Partner Vella shared Ellul’s sentiment, saying that the €400 million investment in industrial parks, €220 million RRF grant and the government’s call for EU state aid for AirMalta a clear reflection of future vision.
“It is logical to first think about how to keep people afloat in this situation. The investment which will benefit the future becomes second priority.”
On a different note, Economist Fabri found it interesting that while MEA notes that the budget lacks vision, The Malta Chamber states that the budget is not addressing the impact that COVID is having on the economy, mainly on businesses. “So, if you combine both statements, from the perception of the employers at least, the budget is not addressing the short- or long-term.”
She explained that the scars COVID-19 is leaving on our economy are deep and the business community is constantly battling against various uncertainties especially due to the international situation which seems to worsen by the day.
For the short-term, Fabri acknowledged that guidance the government provided to address the crisis but noted that the economy is based on perception and the business community needs further guidance, and reassurance that the government is constantly striving to address the financial and economic impact of COVID-19.
With regards to the long-term, she thinks that through this budget the government is indicating where it wants to go post COVID, yet, while welcoming investment in areas for growth, further clarification is needed with regards to the how are we going to get there.
“The answer cannot be provided overnight, it has to involve a thorough consultation process (starting from our children to elderly to employees, business people, self-employed, vulnerable persons, the list goes on), and the measures need to be designed by experts and practitioners that come from various backgrounds. Why? Because this reshaping of our economy involves considerable long-term investment that needs commitment from all decision-makers. I think this is what the business community is after, a clearer direction of HOW, in order to be able to plan their investments which will ultimately boost their confidence.”
Having said this, she said it is important to note that it is not only businesses that are experiencing financial difficulties and increasing uncertainties. “The government is also facing such turbulent times, the fiscal situation is expected to deteriorate for a while, which puts the government in a more difficult position when it comes to designing and implementing measures.”