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BUSINESSTODAY 22 October 2020

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4 NEWS BUDGET2021 22.10.2020 GWU: Budget gives security, stability and peace of mind Economic prudence and fiscal disci- pline over the past few years has ena- bled government to present a budget with no tax increases, the GWU said. It welcomed the extension of the COVID wage supplement, the increase in the in-work benefit and measures to help the most vulnerable, including pensioners and the disabled. e GWU also welcomed the com- pensation for former drydocks workers who got sick as a result of asbestos. MDA: Proposals 'welcome' e Malta Developers Association has been welcoming of the budget propos- als. ey praised the decision to extend the First Time Buyers scheme as well as the introduction of lower taxes for property buyers and sellers. ey noted that initiatives towards higher invest- ment in sustatinable machinery and other incentives favouring the green economy as a "step forward in tune with the MDA's overall vision." "e announcements are a step for- ward so that the property market and other important sectors such as the re- newable energy section, all represented by the MDA, continue to contribute towards the sustainable development of the Maltese economy at large while giving a much needed input towards a rapid boost and increased confidence in the current difficult economic scenario," MDA said. Malta Employers Association: Welcomes stimulus, cautious on growth projection MEA has expressed cautiou on the 5% growth projection for next year due to uncertainty on the duration of the pan- demic and the Moneyval verdict. e MEA described the budget as "a sprinkling of benefits and fiscal incen- tives targeting various sectors of socie- ty", aimed at "stimulating local demand." It has also welcomed the "effective" increase in pensions, the increase in VAT exempt thresholds from €20,000 to €30,000 for businesses and a renewed voucher scheme. However, the MEA shot down the increase in optional leave, which it de- scribed as a "frivolous measure" which will erode competitiveness. Malta Chamber of SMEs: Thumbs up for wage supplement but no VAT cut e Malta Chamber for SMEs ex- pressed a positive verdict on the ex- tension of wage supplements and other incentives introduced during the pan- demic. But the chamber expected more tax incentives to be included in the budget including a decrease in VAT rates, which would have served to boost new investments. MHRA: Budget that helps tourism industry survive e Malta Hotels and Restaurants As- sociation (MHRA) said government de- livered a budget which averts the worst effects in the near future being caused by the pandemic. MHRA expressed confidence that measures will be taken to speed up the recovery as soon as the pandemic subsides. e association welcomed the exten- sion of the wage subsidy to employees working across the travel, tourism, and hospitality sector till March 2021. "is is a key measure which in the circum- stances is being considered as a vital lifeline by MHRA members," the asso- ciation said. e association said the extension of the vouchers scheme was important to sustain the operations of hotels, restau- rants and other economic sectors. It also welcomed the various initiatives aimed at improving the environment and quality of life of all citizens, and the emphasis on green developments and schemes to mitigate the effect of climate change. It described the budget as ambitious and in the right direction. "e budget is allowing for enough space and ability to craft further action as may be neces- sary at the most appropriate time," the MHRA said. GBC: Measures to enhace consumption welcome e Gozo Business Chamber wel- comed the economic stimulus provid- ed through the Budget, especially the measures intended to enhance con- sumption in targeted economic areas. e €100 vouchers was a measure which has impacted positively the Gozitan economy, and the Chamber ex- pects that this measure will again prove beneficial for the island. e GBC also welcomed the extension of existing schemes on property purchases and sales. e Chamber notes the measures tar- geted towards business continuity prin- cipally: the extension of the reduced stamp duty to 1.5% on the transfer of familly businesses; the increased VAT threshold exemption for small operators, from 20,000 to 30,000 euro; the extension of the COVID-Wage Sup- plement till March 2021; and the con- tinuation of the schemes currently im- plemented by the Ministry for Gozo in various economic sectors. GTA: Budget's focus on green economy and digitalisation can help Gozo diversify Expecting the reintroduction of finan- cial measures taken during the pandem- ic, the Gozo Tourism Association noted the renewal of the vouchers and wage supplement schemes, which will "help the tourism establishments endure the winter months." e GTA more happily notes that their proposal for the updating and renewal of the Diving Master Plan for Gozo was included in the Budget document. "is budget is evidently focusing and concentrating on green economy and digitalisation. e Gozo Tourism Asso- ciation believes that the Island of Gozo can optimise on these two niches and thus start slowly to diversify its econo- my, which presently is heavily depend- ent and reliant on the tourism sector," GTA said. FORUM: No new burdens on workers Forum Unions Maltin commended the government for not only recogniz- ing the difficulties brought on by the pandemic, but also for not imposing any new burdens on workers. ey praised the government for building on existing initiatives, includ- ing the extension of the wage supple- ment and vouchers schemes. Among the proposals is an extra day of leave for when holidays fall on weekends, an in- itiative originally proposed by For.U.M. However, the forum expressed their disappointment over the failure to fulfil an election promise to allow parents to utilise their sick leave when their chil- dren are ill. How Budget 2021 was received THE theme for this year's budget is "Strongly Moving Forward". While COVID-19 dealt a major blow to gov- ernment finances, increased government spending will continue through next year to help ease the negative impact of the virus on household. e budget comes with a stimulus package of €100 million that includes €50 million in vouchers. Malta's debt-to-GDP ratio is projected at 58.1% of GDP through 2021, and will remain below 60% until 2023. e deficit is expected to stand at 9.4% of GDP for this year, droopping to 5.9% in 2021. Due to the suspension of the EU's Sta- bility and Growth Pact, Malta has plenty of legroom in terms of fiscal policy de- sign and debt accumulation, allowing government to maintain the current tax regime for the coming years. Vouchers Government's voucher scheme will be extended further with a new round of vouchers to be received by families in the coming days. Finance Minister Edward Scicluna said government will be handing out €50 mil- lion worth of vouchers. e vouchers will be received by every- one aged 16 or over, and will be issued in January. A total of €100 in vouchers will be re- ceived by every individual. €60 will have to be spent at restaurants, while €40 on other services and goods. Macoeconomy Last year's €9.4 million surplus, stand- ing closer to 0.5% of GDP, will likely not be seen until past 2022. is year's figure illustrates a deficit of a whopping 9.4% of GDP, decreasing to a 5.9% deficit in 2021. However it's this high level of govern- ment spending that will allow for a pro- jected 5% growth in real GDP, keeping any impending recessions at bay. e 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 mil- lion surplus in the government's consoli- dated funds, but major spending brought on by the pandemic defied these estimates in favour of a €1.2 billion deficit. Registering a 59% debt-to-GDP ratio and 5.9% deficit during a pandemic is no easy feat, but the government's diet heli- copter money programs, like the voucher scheme and tax rebate initiative, seem to be helping Malta sail through the stormy seas while even the EU's economic giants seem to be taking a battering. e 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% deficit limits – even though Malta seems to be well within the SGP limits when it comes to the debt ratio, less so with the deficit. e 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 main- tain its current tax regime that has kept Malta competitive and attractive in the global economy. Among the macroeconomic winners and losers during the pandemic, Malta seems to be ranking high. Weathering the economic storm

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