2016 government budget surplus ‘a great leap forward,’ say MHRA, MEA

The Malta Hotels and Restaurants Association noted with satisfaction that after 36 years, NSO has reported a government budget surplus for the year 2016 which is no mean feat given that MHRA has been urging governments to budget for a surplus for a long number of years now.

The budget surplus has come on the back of a substantial increase in economic activity prominent among which is the tourism industry which has been producing record arrivals year after year since 2011.

Commenting on this achievement MHRA President Tony Zahra said “Muscatonomics has produced a continuous expansion in the economy which has generated great activity and contributed substantially to government income. The achievement for 2016 was very good, but we must caution against an expansion in government recurrent expenditure which is already far beyond what it should be. This is the time to register substantial surpluses so as these can be made use of when the economic cycle becomes unfavourable which will happen sooner or later as this is the way economies work.”

Mr Zahra added that Malta must now find a financing model to fund the billions of euros in infrastructure costs which is needed to turn the island into a 22nd century smart island. Without this investment, there will be a drag on private investment which will keep the island from making the leap into a regional leader of the stature of Singapore.

‘Budget surplus a positive development, if sustained’ - MEA

The Malta Employers’ stated that in its memorandum to the political parties before the last election, it had placed fiscal consolidation as a major target to government, and the fact that the debt/GDP ratio, as well as the fiscal deficit has been reduced due to economic growth is positive news.

The Association stressed that this trend needs to be sustained, and the fact that this result emerges from a reduction in capital expenditure is of concern. Present and future Governments need to take measures to stabilize recurrent expenditure which is still on the rise to the tune of seven per cent per annum, and this is one of the main reasons that the Association is critical of the increase in employment in some areas of the public sector in a situation which is close to full employment.

The sustainability of a balanced or surplus budget depends on the governance of public funds and to economic growth generated by the private sector which can sustain the increased demands of services such as health and education which are provided by the public sector.