Planning a budget for a sustainable economy

The recently published report by credit agency S&P Global has shed light on the long-term merits of the introduced economic measures which were intended to mitigate any negative economic impact.

Moreover, it strikingly highlights the negative repercussions, in a hypothetical scenario, in which the necessary actions were not taken in a timely manner.

When reading through the recent S&P Global report, this particular phrase which tangibly portrays such an ominous scenario caught my attention, ‘Without this comprehensive fiscal response, Malta’s GDP would have fallen considerably lower, unemployment would have surged faster, and solvent businesses would be forced to liquidate, eroding the economy’s productive base, perhaps permanently.’ It is irrevocably a scenario which, as a government, we have done everything within our power to evade, a stance in which I believe we have succeeded.

Whilst acknowledging the 8% GDP contraction in Malta’s economy, the report nevertheless recognises that ‘ The government has implemented a comprehensive package of emergency measures to safeguard incomes and prevent business closures.’ This remains our ultimate goal, the mainstay on which the budget for 2021 will be built, that is, the continuation of our stance in safeguarding as many jobs and as many businesses as possible.

Moreover, it is interesting to note that our past economic decisions resulting in ‘ high income levels, recurrent current account surpluses, and policymaking that has promoted reduced fiscal imbalances’ translated into S&P Global’s latest credit rating for Malta at A-/A-2 with a Stable Outlook, in spite of the global pandemic and its severe negative impact on several countries.

Away from yet another strong testimonial to our economic decisions, we must not lose sight of how this certainty and stability has been generated. It is by the ceaseless commitment of each and every one of us, as direct contributors in the development of our nation that this has been made possible. For example, the well-received voucher scheme has been immensely successful, with a huge contribution by the public in stimulating the domestic economy, while bolstering our valuable SMEs, which during challenging months have suffered a decline in their revenues. This spending has been a life saver for many SMEs, with strong multiplier impacts, as the demand from restaurants and hotels spilled over to many SME-dominated sectors. In fact, the vouchers scheme will be generating €65 million into our economy and this includes the significant multiplier effect it brought about when redeemed. Other measures have also sought to protect businesses; moratoria on loans and the postponement of VAT and NI payments have all contributed to helping our businesses stay afloat during these difficult times.

All this is well reflected in the Business Conditions Index published by the Central Bank of Malta which shows improvement in the month of August when compared with the previous month. Despite the exceptional economic environment triggered by COVID-19, the Economic Sentiment Indicator also edged up when compared to the same period, clearly indicating improved sentiment in the services sector and industry. The number of registered unemployed and the unemployment rate also fell in August when compared with the preceding month, with the latter remaining relatively low from a historical perspective. While seemingly unremarkable, in this climate these remain the milestones by which we can truly gauge our performance and judge whether our decisions are actually effective.

Predictably, the world’s economic standpoint is now about to embark on a new era in its history. Now is the time to take control and determine our own journey. Unprecedented events in our history have consistently proved Malta’s economic agility and fast-moving advantage to adapt and most of all our innate ability to seek opportunities when everything seems to be going south.

In this ever-changing scenario there are very few certainties, however, the way forward is clear; this is a new era which needs a new mindset, a new modus operandi. We have to let go of our traditional way of doing things and strive to enhance, as much as possible, our workers’ skills and fully nurture our businesses to become greener and more digital in outlook.

Inarguably, an empowered and digitally focused community that embraces and successfully adapts to change, however difficult, not only enhances the country’s economy and ultimately its competitiveness, but also ensures the long-term prosperity of its citizens.

As Minister for the Economy, Investment and Small Businesses, several consultations, meetings and maintaining a consistent dialogue are being pursued with the relevant parties to find the best way forward with regards to tweaking existent measures and introduce new ones with the ultimate aim of protecting the livelihoods of thousands of families that shall pave the way forward for a sustainable economy. This is the certainty we are providing in a scenario of unpredictability. We know where we want to go and more importantly, where we want to arrive; the continuing generation of wealth for our people, without and this I believe is crucial, burdening our future generations with an unspeakable legacy of monumental debt.

We have together averted what could have been a tragic scenario, a scenario which would have unquestionably caused extensive, irreparable damage to our economy. This is yet another demonstration that as we have done oftentimes in our long history, together, we have once again prevailed. Discussions with stakeholders continue unabated to ensure that we keep on building on what has been achieved so far and together discern what needs and remains to be done. Budget 2021, the very first budget to be presented by Prime Minister Robert Abela, has at its core our hardworking employees, who, over the past months have made several sacrifices which resulted in bringing about the recent positive outcomes which shall gradually steer the Maltese economy back on track.