Issue link: https://maltatoday.uberflip.com/i/823173
maltatoday, FRIDAY, 12 MAY 2017 News 8 MATTHEW VELLA AN economic forecast from the European Commission has said risks to Malta's fiscal out- look remain balanced as snap elections will see higher gov- ernment spending, adding that any budgetary slippages will be compensated by cash from citi- zenship sales. According to the spring forecast, in 2017 Malta's fis- cal surplus – currently at just over €100 million after a boost from citizenship sales – will be expected to decline to 0.5% of GDP. In 2016 taxation and higher- than-expected proceeds from Malta's citizenship programme (1.7% of GDP) contributed to the fiscal surplus. While tax revenues will in- crease thanks to robust eco- nomic growth and a strong jobs market, lower proceedings from the citizenship scheme will slow down overall revenue growth. "Malta's economy performed better than expected in 2016. Real GDP growth expanded by 5%... Growth was driven primarily by services exports, in particular gaming and pro- fessional services. Private con- sumption expenditure also drove growth, fuelled by gains in disposable income and de- clining unemployment," the EC said. Spending could also increase due to the renewal of the pub- lic sector wage agreement and costs associated with Malta's presidency of the EU, while public investment will stay un- changed as the implementation of EU-finance projects and IIP revenues slow down. In 2018, the budget surplus is projected to improve fur- ther to 0.8% of GDP. National debt, which fell below the 60% threshold in 2016, is forecast to decline further to 52.5% in 2018. Malta's strong economic per- formance is closely informed by rising labour market par- ticipation and employment, in particular among women, with jobs growth averaging 2.9% in 2017-2018, while the unem- ployment rate stabilises at just below 5%. While wages will increase, rising productivity is expected to keep labour costs contained. But price inflation is also pro- jected to gradually increase due to rising fuel prices and higher wages. "Strong economic growth could spur private consump- tion and investment further, albeit somewhat offset by in- creased uncertainty due to the announced elections. The launching of the Malta Devel- opment Bank could provide an additional boost to investment. The decision to increase the minimum wage may support private consumption further, although the impact on GDP growth could be offset by high- er costs for employers," the EC said. Surplus could improve in 2018, European Commission forecasts Strong economic growth could spur private consumption and investment further, albeit somewhat offset by increased uncertainty due to the announced elections