Issue link: https://maltatoday.uberflip.com/i/410228
10 Business Today maltatoday, WEDNESDAY, 5 NOVEMBER 2014 Deficit to grow slightly in 2015 but EC says Malta weathering 'choppy waters' Matthew Vella Economic activity in Malta has contin- ued to outperform the weak growth in the EU in the first half of 2014, with a strong rebound in investment pro- jected to boost growth to 3% in 2014, before moderating somewhat over the forecast horizon. The European Commission said Malta's economy was "sailing smoothly in choppy waters" with a budget deficit projected to gradually decline over the forecast horizon, and government debt forecast to remain stable. The Commission said Malta's deficit appeared to be under control despite growing spending. The general government deficit is expected to improve marginally in 2014 to 2.5% of GDP, from 2.7% in the previous year, and current revenues are projected to increase thanks to the favourable macroeconomic outlook as well as to the revenue increasing measures included in the 2014 budget. These included increases in indirect taxation, the new programme to grant Maltese citizenship to foreign individuals and families and the introduction of a new tax regime for rental income. In July, a new scheme intended to enable taxpayers to adjust past irregular declarations of income was launched. "Despite the restrictions on recruitment envisaged by the 2014 budget, employment in the public sector has increased due to the temporary nationalization of the transport system as well as higher recruitments mainly in the health and education sectors. Therefore current expenditure is expected to increase, also due to higher than expected subsidies to the transport sector as well as intermediate consumption," the EC said. Net capital expenditure is expected to fall due to a lower capital injection into Air Malta, compared to the one in 2013. In 2015, under the no-policy-change assumption, as the 2015 budget was not presented before the cut-off date of the forecast, the deficit is expected to increase marginally to 2.6% of GDP, also due to a further capital injection into Air Malta, higher than in the previous year (0.5% of GDP). In 2016, using the no-policy-change assumption, the deficit is expected to decline to 2.0% of GDP, thanks to a favourable growth outlook and to the expiration of the public support for Air Malta. After having declined by more than one percentage point of GDP in 2013, the structural deficit is projected to stabilise in 2014 and to deteriorate marginally in 2015. In 2016, the structural deficit is expected to improve by 0.5 pp. of GDP. The general government debt-to- GDP ratio increased to 69.8% in 2013, also on account of a debt-increasing stock-flow adjustment. Despite the expected repayment of some tax arrears from Enemalta, the debt ratio is projected to continue increasing in 2014 thanks also to a higher cash buffer at the end of the year, before moderating somewhat by 2016. Overall, real GDP growth is projected to reach 3% in 2014 and moderate gradually to 2.9% in 2015 and 2.7% in 2016. Large scale energy projects, including the construction of a power plant in 2014-15 are expected to be a major driver of growth over the forecast horizon. Improving business sentiment and the absorption of EU funds, as projects funded under the 2007-13 financial framework are coming to an end, are expected to provide a further boost. Private investment in equipment and machinery is set to benefit from improving financing conditions, reflected in a gradual decline in interest rates, but bank credit standards for the construction sector are not expected to loosen notably. Malta Airport sees 2.9% increase in passengers in October Malta International Airport registered a 2.9% increase in traffic in October, welcoming a total of 421,726 passen- gers. The total number of landings and take-offs at the airport increased by 0.5% to 2,997. These figures were stimulated by an overall seat load factor that reached a high 83.9% for the month, compared to the lower figure of 81.6% recorded last year. "We are very pleased to see the airport continuing to perform steadily even during the off-peak months. Malta is slowly managing to establish itself as a year-round destination, particularly among visitors from continental Europe," MIA chief executive officer Markus Klaushofer said. The airport's top market, the UK – representing over 28% of all traffic – saw a marginal drop of 0.8% over October last year. France registered the largest growth last month, at 25.8%, due to increased capacity on both Paris routes and the recent introduction of the Nantes route. The other core markets, Italy and Germany, saw an increase of 8.9% and 2.8% respectively. Meanwhile, Switzerland established itself as the fifth major market last month, marking a growth of 20.2%. Between January and October this year, Malta International Airport was busy, seeing an increase of 6.7% when compared to last year's figures, hosting a total of 3,807,534 passengers. The maximum take-off weight (MTOW) went down, slightly, by 0.3% and cargo and mail increased by 12.1%. The airport is now operating on its winter schedule, which was launched just last month, on 26 October. It can be viewed at www.maltairport.com/ airlines. Growth to reach 3% in 2014 and moderate to 2.9% in 2015 and 2.7% in 2016 • Delimara LNG plant expected to be a major driver of growth over the forecast horizon. Edward Scicluna