Issue link: https://maltatoday.uberflip.com/i/1528615
6 maltatoday | TUESDAY • 29 OCTOBER 2024 BUDGET2025 OPINION MALTA'S 2025 Budget brings a distinctly pro-social redis- tribution socialist approach, designed to increase dispos- able income and boost con- sumption through a combina- tion of tax cuts and targeted social handouts. This budget prioritises redistribution, with particular attention given to vulnerable groups, signalling a commitment to immediate so- cio-economic support. How- ever, there was not enough focus on addressing long-term challenges such as productiv- ity which are crucial for eco- nomic resilience and compet- itiveness. The budget's core focus is on economic stabilisation and supporting domestic demand. Tax cuts and social benefits form a significant part of the fiscal approach, with notable attention to specific cohorts such as low-income families and pensioners. The announced tax cuts will inflate disposable income by €140 million which will fur- ther support and already buoy- ant consumption. While these measures offer essential relief, they need to be accompanied by structural improvements to Malta's productivity and eco- nomic fabric. Social handouts, though nec- essary, are not sufficient to ad- dress the systemic challenges the economy faces in a com- petitive global landscape. An over-reliance on short-term consumption-driven growth needs to be accompanied by parallel efforts to strengthen Malta's productivity and ca- pacity for inclusive, sustaina- ble growth. Productivity remains a key pillar for economic resilience, providing the foundation for high-quality, well-paying jobs and enabling funding for pub- lic services. Yet, this budget is light on measures to tackle Malta's declining productivity rates. Unlocking productivi- ty potential is essential for a sustainable economy. While there are schemes and incen- tives mentioned, they lack a dedicated focus on enhancing productivity. One hopes that Vision 2050 will be the need- ed anchor for future policies, strategies and budgets. The budget introduces initia- tives in educational infrastruc- ture, teacher packages and in- creases in stipends. While commendable, the ed- ucational strategy requires a stronger focus on outcomes, particularly addressing ear- ly school leavers and aligning curriculums with industry needs. Infrastructure improve- ments alone will not suffice to prepare Malta's future work- force for a rapidly evolving economy. In the coming years, a stra- tegic shift is needed in Malta's education system to prioritize skill development that aligns with both national and global economic demands. STEM investments should be matched by efforts to re- form curricula, emphasise critical thinking, and prepare students for real-world chal- lenges. Building a resilient and attractive economy hinge on future-proofing Malta's ed- ucational approach to create a workforce that can sustain economic growth and adapt to global shifts. The budget's allocation for healthcare largely centres around infrastructural im- provements, continuing a pat- tern of investments in acute care rather than preventive measures. Prevention-based healthcare is essential for improving the overall well-being of the popu- lation and reducing long-term healthcare costs. Countries that have successfully tran- sitioned toward preventive healthcare frameworks have observed enhanced health out- comes, cost reductions, and improved public satisfaction. In this regard, I would like to see the budgetary process embrace more fully the con- cept of impact assessments and performance-based budg- eting. By linking funding to programme performance, performance-based budgeting aims to improve the effective- ness and efficiency of public function implementation by allocating more funds to pro- grammes that work and less funds to those that do not. This approach also delivers a higher quality of public servic- es, a reduction of general gov- ernment expenditure and staff costs, and more flexible and less bureaucratic management of the government sector. This will support the discus- sion on public expenditure, its efficiency, and effectiveness. These are all elements that are required within Europe's new budgetary governance mecha- nism. Malta's economic perfor- mance seems to defy the glob- al economic environment. Indeed, compared to its Eu- ropean peers, Malta had the highest economic growth rate in 2023 (7.5%), significantly outpacing EU average growth (0.4%). As an economist I am concerned with the growth composition for 2024 and 2025. Although exports are ex- pected to increase by around 5% in both years, GDP growth primarily emanates from do- mestic demand increases, mainly from private consump- tion expenditure. As we need to build a sustain- able economic, I need to em- phasise the importance of ex- port-led growth and the need to improve competitiveness through labour productivity increases for sustainable me- dium-term economic growth. To this end, I would have liked to see more structural re- form efforts and promote pro- ductive investment, particular- ly in the areas of digitalisation and green transition, research and innovation, physical and social infrastructure, address- ing skills gaps and shortages in the workforce and improving education outcomes. In essence, Malta's 2025 Budget offers valuable social support. However, to position Mal- ta for long-term success, it is essential to complement re- distribution with investments that build resilience, foster competitiveness, and elevate productivity. Future budgets should strive to balance immediate eco- nomic stabilisation with a forward-looking vision that addresses Malta's structural weaknesses. By focusing on productivity-enhancing meas- ures, aligning educational re- form with economic needs, and prioritising preventive healthcare, Malta can build an economy that is not only sus- tainable but also inclusive and robust. As Malta looks towards Vi- sion 2050, a comprehensive, cohesive approach to fiscal policy and economic planning will be key to ensuring Malta's success on the global stage. EVERY budget in a legislature counts, and this one is no ex- ception. As the Finance Minis- ter presented the budget speech yesterday, we are reminded that social democratic Malta wants investment that reaches every corner of our society and im- proves our daily lives. Consistent economic growth ultimately equates to a better quality of life for the Maltese is- lands. However, just because the numbers add up, that does not mean that our work stops here. When it comes to our infra- structure, continued investment in every facet of our work – im- proving accessibility, modernity and efficiency – is the ultimate priority in this year's budget. When one looks at Malta through a prism, our biggest and perhaps, our most underrated commodity is the Mediterranean Sea that wraps our shores. Af- ter making public transport free for all in the last legislature, we will now extend this scheme to boats that operate between Val- letta and Birgu and Sliema. We will conduct a studied approach on designing transport corridors that connect the north of Mal- ta by maritime transport with the rest of the public transport Social to the core Another year, budget JP Fabri is an economist JP Fabri In essence, Malta's 2025 Budget offers valuable social support. However, to position Malta for long-term success, it is essential to complement redistribution with investments that build resilience, foster competitiveness, and elevate productivity. The use of technology to manage the country's traffic and monitor air quality is also a main focus of this budget