Tomorrow’s budget

The Government’s prebudget document recognises how the outbreak of the Coronavirus pandemic has brought about unprecedented stresses to the global economy, with the evident effects on economic activity.

While Malta was not immune to the pandemic and its impact on the economy, our country has had a solid starting point. Had it not been for this, we would now be in a totally different scenario.

Prof Scicluna’s forward in this document is clear: Six years of unprecedented economic growth left our country well prepared for a possible external economic shock, while four years of consecutive fiscal surpluses and a declining National debt burden put the Government in a solid financial position to weather a crisis. The Malta Government could therefore afford to immediately launch a series of financial packages to address the health emergency needs, ease liquidity pressures on businesses and safeguard jobs and households’ income. Acting pro-actively, the Government also launched a comprehensive recovery plan to regenerate the Maltese economy upon the gradual reopening of the economy from its partial lockdown. The 2021 Budget is being prepared with this recovery plan in mind. Its objective is to ensure that Malta would return to the path of economic growth witnessed in recent years.

I quoted in length as I believe that this Government will be presenting a budget to continue strengthening those sectors which in this ‘new normality’ need aid to continue with their day-to-day life and survive. As said in the mentioned document, for the medium term, the country needs to strike a balance between health and economic well-being and the need to implement measures which safeguard public health, jobs and the economy.

In the recent past I penned down several times my opinion on the importance of striking this fine balance as well as on what I see as part of the necessary future of this ‘new normality’. With the COVID19 pandemic bringing about a drastic change in the ‘normal’ work habitudes, I sincerely think that we should assess the positive outcomes, which contributed to our quality of life, and obviously our productivity, and build upon them, keeping in mind also the green and digital transition.

Information technology and digital infrastructure played – and are still playing - a massive part during COVID-19, without which we would all have come to a drastic standstill. My opinion is that both locally but also within the European Union, flexi work should be encouraged wherever possible. We need dialogue and strong structures that offer flexible working conditions with the priority given to results and not to physical presence at those places of work that permit this structure. We need to promote a culture of flexibility based on trust at the workplace as I truly believe that flexibility benefits both the employer and the employee.

Here, the Government’s “Facilitating telework activities scheme” gave financial assistance to employers to invest in technology that enable teleworking arrangements to their employees by partially covering the cost of teleworking solutions. Up to the end of July, 370 businesses benefitted from this scheme with the cost amounting to €605,613. I strongly believe in the importance of such schemes as an incentive for SMEs to seriously consider the flexi-work option and we should see more of them.

To mitigate the negative effects on economic activity brought about by the unavoidable restrictive measures due to COVID-19, the Maltese Government also introduced several measures targeted to households and businesses to sustain public welfare and safeguard jobs. The Economic Regeneration mini budget helped families and businesses across the island and also pumped millions back into the economy. Unemployment due to COVID-19 was kept in check and the wage supplement scheme, along with the parent benefit scheme safeguarded the jobs of 84,126 individuals.

In fact, Malta’s unemployment rate as at June 2020 stood at 4.2 per cent, registering a relatively marginal increase of 0.8 per cent from the same rate recorded in March 2020. Indeed, in June,

Malta’s harmonized unemployment rate was 2.9 percentage points lower than the EU-27 average and was the third lowest rate recorded amongst the EU Member states and the lowest among EuroArea members.

One of the most hard-hit sectors is without any doubt tourism; a sector which holds a primary place within the Maltese socio-economic context. This year started very positively. January and February, recorded some impressive results, paving the way to what was going to be another record year in inbound tourism. Unfortunately, the COVID-19 outbreak ground to a halt the travel and tourism industry in Malta and worldwide. The sector and all those dependant on it are still in dire straits.

In this regard, I positively note that the pre-budget document states that the Government’s primary strategic objective for tourism in 2021, shall be to continue working relentlessly to revive the travel and tourism industry for the benefit of the whole economy. I am confident that tomorrow’s budget will also cater for this. In the long-term its important to collaborate together, not only locally but also at the EU level and beyond, to revive this important sector in a resilient manner!