Issue link: https://maltatoday.uberflip.com/i/1510683
16 maltatoday | TUESDAY • 31 OCTOBER 2023 BUDGET2024 A national budget is much more than a financial exercise. It is an economic document which steers the country's econom- ic direction through a myriad of measures and incentives to- wards a vision. It remains a key economic document which out- lines the way resources are being allocated especially if they are aimed at the short-term or more focused on addressing structural challenges or preparing for long- run goals. Notwithstanding a very frag- ile external environment, Mal- ta has performed very well over the past few years, particularly in terms of economic growth. In fact, Malta has come second to Ireland in a classification on European economic perfor- mance compiled and published by The Economist. Despite the successes, Malta needs to re- main proactive to ensure our long-term competitiveness and attractiveness. The social dimension was very strong in this Budget, and it can definitely be labelled as a budget with a heart. Govern- ment focused on stabilising the economy by protecting the vulnerable groups by support- ing their purchasing power and by ensuring they can remain active in the labour market and broader economy. The support given to pensioners, disabled people, and their families as well as to the at-risk-of-pover- ty cohort are all targeted and aimed at supporting their in- clusivity in the economy. From an economic perspec- tive, the balance weighs to- wards the continuation of ex- isting schemes. In line with these schemes, the implemen- tation of potential future am- bitious reforms and transfor- mation strategies are needed to support this investment. Evidence points to a decreas- ing performance in terms of productivity. Productivity is key to sup- porting high quality and re- warding jobs, and funding pub- lic services. Unlocking Malta's productivity potential will help build a stronger more resilient economy that delivers inclu- sive and sustainable growth. To this end, one hopes that the numerous schemes and in- centives that were mentioned would be focused on enhanc- ing productivity. Malta's success in achiev- ing direct EU funding for the semi-conductor industry needs to be applauded and replicated across other sectors. Sectoral transformations in the maritime, aircraft and finan- cial services are also welcome. Going forward, Malta requires a sustained effort on support- ing research and innovation, however the announced ven- ture capital fund is a step in the right direction. From an education perspec- tive, the Budget focuses on supporting students through increased stipends and re- newed investment in educa- tional infrastructure particu- larly STEM related. In the coming years these need to be supported with measures that emphasise on education- al outcomes especially relat- ing to STEM disciplines and Early School Leavers. We also believe that a discussion on the educational system, its re- form, and the need to have a more future-proof and indus- try-ready school curriculum is needed and should be on Gov- ernment's agenda if we really want to build a resilient and attractive economy. On health, the investments are broad and infrastructural based. In line with what other advanced economies are implement- ing, we believe that Malta also needs to focus more on pre- vention efforts which can con- tribute to general well-being. Although several incentives and measures were announced, it is now of utmost importance that these are rolled out and implemented swiftly and effi- ciently. Resources need to be redeployed accordingly to en- sure that such measures tru- ly stimulate the economy and see the light of day as other- wise they will not have their intended effect. Implementa- tion is going to be key and here one would have hoped to see a stronger commitment towards institutional reform, govern- ance transformation and dig- italisation especially aimed at improving service delivery. Another area that the budg- etary process needs to embrace more fully is the concept of impact assessments and per- formance-budgeting. Perfor- mance-Based Budgeting aims to achieve more effective and efficient implementation of public functions, higher qual- ity of public services, reduc- tion of general government expenditure and staff costs, and more flexible and less bu- reaucratic management of the government sector. This will support the discussion on pub- lic expenditure, its efficiency and effectiveness. We are living in highly un- certain and volatile times. This Budget provided a continuity exercise with the extension of numerous schemes and incen- tives. It continues to aim for the stabilisation of economic activity and the support of do- mestic demand. At first glance, this is defi- nitely a budget with a heart and one which pursues stability. The main challenge is how to address the longer-term vision of enhancing productivity and ensuring a competitive Malta. In the pursuit of stability Dr Stephanie Fabri & JP Fabri are both economists Dr Stephanie Fabri & JP Fabri