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2 maltatoday | SUNDAY • 10 NOVEMBER 2024 BUDGET2025 A deep dive into the Maltese THE Economic Survey for 2024 provides a comprehen- sive analysis of the Maltese economy, which held up its head as the tailwinds of a resil- ient global economy exceeded recession predictions. While growth varied across regions, the EU experienced stagnation due to the energy price shock and subsequent in- terest rate hikes. Malta's economy maintained a positive trajectory in the first half of 2024, with robust nominal and real GDP growth surpassing EU and Euro Area averages. Domestic demand, particularly private consump- tion fuelled by a strong labour market, emerged as the prima- ry growth driver. Net exports also contributed positively to growth, remain- ing relatively insulated from the global slowdown. The services sector contin- ued to dominate the Maltese economy, accounting for the largest share of Gross Value Added (GVA). In the first half of 2024, the services sector continued to be the primary driver of econom- ic growth in Malta, generating 91.5% of the total Gross Value Added (GVA) – reinforcing its longstanding position as the main pillar of the Maltese economy. The real estate sector and financial and insurance activ- ities exhibited robust growth, registering increases in GVA of 17.1% and 12.4%, respec- tively. This strong perfor- mance was attributed to in- creasing demand for property in Malta, which has been driv- ing up prices; and a tightening of monetary policy in recent times that contributed to the strong performance in finan- cial and insurance activities. In contrast, digital services sectors experienced a slow- down, recording a nominal increase in GVA of just 2.3% in the first half of 2024. This marked a continuation of the slowdown observed in the pre- vious year. While this slow- down is partly attributed to the large base effects experi- enced during the pandemic, it also suggests a possible matu- rity stage for the gambling and betting sector, which has been a key driver of growth in digital services. Malta's inflation rate moder- ated in the first half of 2024, though it remained above the EU average. Property pric- es in Malta continued to rise, contrasting with the declining trend observed across the EU. Public finances Malta's debt-to-GDP ratio has decreased due to a con- fluence of factors: robust economic growth, prudent spending controls, increased government revenue, and a policy emphasis on fiscal sus- tainability. These factors have contribut- ed to a reduction in the budget deficit, leading to a lower debt burden relative to the size of the economy. The Maltese economy wit- nessed substantial growth in recent years, surpassing the performance of numerous EU nations: this economic expan- sion has generated increased tax revenues, aiding in the reduction of the budget defi- cit and subsequently, a lower debt-to-GDP ratio. In the first half of 2024, Mal- ta's economy grew by 9.6% in nominal terms and 5.9% in real terms. This significantly ex- ceeded the growth rates of the EU (0.7%) and the Euro Area (0.5%) during the same peri- od. This strong growth was primarily fueled by domestic demand, particularly private consumption, which was sup- ported by a robust labour mar- ket. Expenditure on energy, fuel and cereal subsidies also de- creased by €96.7 million in the first half of 2024, primarily due to lower gas prices. Elevated tax revenues, pro- pelled by economic growth, have been instrumental in di- minishing the budget deficit and lowering the debt-to-GDP ratio. During the first half of 2024, general government revenue increased by €286.2 million or 8.3% compared to the same period in 2023. This was main- ly driven by a 13.7% increase in revenue from indirect tax- es, including a €158.4 million increase in Value Added Tax (VAT). The declining debt-to-GDP ratio itself serves as a key in- dicator of the government's fiscal management record, with general government debt- to-GDP ratio decreasing from 49.4% in 2022 to 47.4% in 2023, remaining well below the EU's 60% threshold. Major sources of revenue 2023-2025 The most significant sourc- es of revenue for the Maltese economy, as detailed in the financial estimates will be in- come tax, the largest single source of revenue for the gov- ernment. Estimates for 2025 see it in- creasing from €2.5 billion to €2.84 billion. VAT will increase from €1.45 billion in 2024 to €1.61 billion in 2025. Stamp duty will increase from €205 million to €255 million. Excise duties, such as that on machine-made cigarettes, will increase from €94 million to €96 million. Import duties will decrease from €32 million to €27 mil- lion. Demographic changes Malta faces challenges re- lated to an ageing population and a declining birth rate. These demographic shifts are reflected in rising dependency ratios, indicating an increasing proportion of the population relying on the support of the working-age population. As of the end of 2023, Malta's population stood at 563,443 individuals, a 33.7% increase