Issue link: https://maltatoday.uberflip.com/i/1510993
Steve Ellul is a financial analyst THE Maltese economy contin- ues to grow at an above average rate supported by historically low unemployment levels. On the other hand, inflationary pressures are taking a toll on citizens' wallets. Last Monday, the finance minister delivered his budget speech against this economic backdrop, with a keen focus on striking a balance be- tween reining in public spend- ing, maintaining the economic momentum and alleviating the effects of the rising cost of living on the population. This budget undeniably aimed to bolster the purchasing power and income of a substantial por- tion of our working population and pensioners. It achieved this goal by increasing disposable income and promoting a fairer distribution of wealth, particu- larly among the most vulnerable members of our society. Stability first The retention of the energy subsidy that has supported the economy for the past two years is a critical measure, offering stability and peace of mind to businesses and families alike. These subsidies significantly re- duce the cost of living pressure on the middle class and low- er-income families. Discontinu- ing these subsidies would leave some families €2,000 worse off, a scenario avoided by Malta while other larger economies grapple with recessionary challenges due to similar decisions not being made. Direct increase in disposable income The budget specifically ad- dresses pensioners and low- er-income earners who mostly bear the brunt of inflation. The most significant measure in this budget is the substantial increase in weekly pensions, equivalent to an extra month's pension annu- ally for some. Additionally, the long-overdue boost in the minimum wage is a very positive step which many other countries cannot take into consideration given the financial and political constraints they would face should they opt for such social measures. The extension of the COLA+ mechanism together with the increases in children's allow- ance and cash grants provided for families with children con- tinuing their education beyond the age of 16, further enhance disposable income and contrib- ute to reducing the issue of early school leavers. Incentivising longer careers A crucial measure in the budget is the improvement in the pension income for senior employees who choose to keep on working instead of opting for early retirement. Reducing the tax burden on working pension- ers also encourages experienced individuals to remain in the la- bour force. Planning for a stronger eco- nomic fabric Whilst many focused their at- tention on the most visible social measures, the budget speech al- so emphasised the need to ele- vate Malta's economic model. Notably, investments in spe- cialised manufacturing, par- ticularly in the semiconductor industry, are forward-looking initiatives. Malta's participation in a stra- tegic European programme for semiconductors and the invest- ment in a competence centre for this industry positions the country as a potential centre of excellence in a niche sector, boosting the manufacturing in- dustry and economic model. Sustainable finance and the green economy The budget paves the way for clearer guidelines on the allocation of financial capital in the coming years. Fiscal in- centives for Maltese investors to support green projects over conventional ones could be transformative, unlocking the €24 billion euros currently held in deposit accounts for invest- ment in a greener economic model. These incentives might include tax reductions on in- terest paid on green bonds and guarantees on such invest- ments. The budget also underscores Malta's commitment to green- er and cleaner energy sources, including offshore renewables, green energy from waste, bat- tery storage investment, and a strategy for using hydrogen as an industrial fuel, all while main- taining energy subsidies and modernizing the electricity dis- tribution infrastructure. Through the 2024 Budget the government has skilfully bal- anced the immediate needs of workers and citizens whilst pre- senting a framework on which the economic model can evolve in the years to come. maltatoday | SUNDAY • 5 NOVEMBER 2023 10 OPINION More than just a social budget Steve Ellul