Issue link: https://maltatoday.uberflip.com/i/1300699
14 maltatoday | TUESDAY • 20 OCTOBER 2020 BUDGET2021 NICOLE MEILAK WHILE COVID-19 has had devastat- ing economic impacts on countries world-over, Malta has come out rela- tively unscathed compared to our EU counterparts. Projections for 2021 show major increases in debt - even Germa- ny, one of the EU's economic giants, will be seeing a debt-to-GDP ratio of 70%. Although high, the figure is still better than that for already battered econo- mies like those of Italy and Spain, who will be seeing ratios of 160% to 120% respectively. Malta will only be seeing a 58.61% debt-to-GDP ratio through 2021, allowing the government plenty of legroom in fiscal policy design. However government debt will be fol- lowing an upward trend up until at least 2023, with projections showing a 60.45% debt-to-GDP ratio in 2023. Major in- creases will be seen in government-is- sued stocks and treasury bills to help finance government spending, but it looks like government will be resorting to foreign loans for financial support. Last year's €9.4 million surplus, stand- ing closer to 0.5% of GDP, will likely not be seen until past 2022. This year's figure illustrates a deficit of a whopping 9.4% of GDP, decreasing to a 5.9% defi- cit in 2021. However it's this high level of government spending that will allow for a projected 5% growth in real GDP, keeping any impending recessions at bay. The effect of the pandemic on govern- ment funds is most clearly seen in the consolidated fund balances. Last year's approved estimates projected a €113 million surplus in the government's consolidated funds, but major spend- ing brought on by the pandemic defied these estimates in favour of a €1.2 bil- lion deficit. Registering a 59% debt-to-GDP ra- tio and 5.9% deficit during a pandemic is no easy feat, but the government's diet helicopter money programs, like the voucher scheme and tax rebate in- itiative, seem to be helping Malta sail through the stormy seas while even the EU's economic giants seem to be taking a battering. The suspension of the Stability and Growth Pact allows the government even more leeway by not having to ad- here to the strict 60% debt and 3% defi- cit limits – even though Malta seems to be well within the SGP limits when it comes to the debt ratio, less so with the deficit. The major advantage of such a robust debt ratio is the flexibility it grants in Malta's tax regime. Government is af- forded the liberty to borrow more in the future if the situation necessitates it, thus not having to resort to raising taxes and increasing the tax burden. On top of this government can maintain its current tax regime that has kept Malta competitive and attractive in the global economy. Among the macroeconomic winners and losers during the pandem- ic, Malta seems to be ranking high. Weathering the economic storm Government's wage supplement extended until at least March Widows and widowers in civil union to start receiving benefits Paceville to get security CCTV treatment MACRO-ECONOMY WAGE SUPPLEMENT CIVIL UNIONS SAFE CITY Robust macroeconomic indicators signal success for Malta GOVERNMENT'S wage supplement will be extended to until at least March 2021. The wage supplement was first intro- duced last March, as part of government economic recovery scheme. Currently businesses are eligible for up to €800 a month for every full-time work- er. The wage supplement in its current format will continue until at least the end of the year. A review will be undertaken to de- termine whether the amount granted should be changed will be carried out at the end of the year. Current expenditure is at €30 million monthly, but government anticipates this might increase. The scheme looks to incentivise busi- nesses in retaining their workers. Un- employment in Malta currently stands at 4.1%. WIDOWS and widowers in civil union will start receiving benefits when their spouse dies. Finance Minister Edward Scicluna said in light of the cohabitation and civil un- ion legislation, government will be re- newing the definition of widow and wid- ower in the law governing social security. The amendment will allow cohabitants and partners to be recognized as widows. The amendment will also cater for those who did not register themselves as cohabitants or in civil union due to the untimely date. A budget allocation of €410,000 will see the development of a CCTV system for the Paceville entertainment area for se- curity purposes. The system will fall under the Safe City concept first announced two years ago, which was intended to include face recognition software. In his budget speech, the Finance Minister had a one-line reference to the Paceville CCTV system under the tour- ism headings. "Where security is concerned, we will continue working to develop the Safe City concept. The first zone where this will be implemented is Paceville. Over the past months, there were ongoing talks with the police, focussing on the technical aspects and the legal frame- work to ensure this zone is protected by CCTV cameras," the budget speech read. The Smart City concept has not been fully laid out and the prospective use of facial recognition software has raised concerns on privacy.