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CommercialCourier Issue 102 | November 2022
Brave but not bold PRESIDENT MARISA XUEREB AND CEO DR MARTHESE PORTELLI, THE MALTA CHAMBER
The annual Budget is an important annual appointment because it lays down Government's programme of action for the coming year and hence the economic direction of the country. We have been facing an onslaught of economic challenges since Covid struck in the first quarter of 2019. Since then, Government has been pumping millions into the economy, largely to preserve our current economic model, which is very consumption driven and reliant on a growing imported supply of labour.
T
he budget for 2023 is very much a continuation of the policy prescription adopted since the outbreak of the war in Ukraine. Ten percent of Government expenditure is earmarked for mitigating the effects of the war, with the biggest cost outlay being the continued subsidisation of energy. The economic reasoning is clear: energy impacts everyone from consumers to businesses irrespective of their size. By maintaining stable energy prices, inflationary pressures are mitigated and the economy is at least partially insulated from the adverse effects of persistently high inflation. Businesses who are exporting can be more competitive and the purchasing power of consumers is safeguarded. In this respect, the budget for 2023 goes a step further by introducing additional Government assistance in the form of a second cost of living adjustment for low income earners, and substantial increases in pension and social assistance for persons with disability. There is not much beyond energy subsidisation and support for low income earners that is locally funded. Government is putting all the funds it can raise through the issue of Government stocks, more efficient tax collection and some cuts in superfluous public sector expenditure, into this. Planned investments and other initiatives related to the electrification of vehicles and support for businesses to undertake digital and green investments are largely EU-funded. The attainment of the fiscal targets for the
coming years depends greatly on maintaining a real economic growth rate above 3 percent, which in the present international economic landscape is pretty ambitious. Europe is slated to go into recession, and this is likely to impact our exporting industries. The prospects for tourism in 2023 are somewhat muted by the expected contraction in discretionary spending by European households as they grapple with hefty energy bills this winter. There are important questions on how our economy is operating beyond full employment. It will manage to secure the required human resources to increase output, and whether it can actually handle more growth in third country national employment considering the impact that this has on our infrastructure and the provision of public services. The latter considerations were acknowledged in the National Employment Policy published in August 2021, but there seems to be some reluctance in changing strategy on this front. While our economy has grown steady in the years preceding Covid and recovered quickly from the economic dip triggered by the pandemic, sustainability issues are emerging. Traffic congestion seems to be getting worse in spite of substantial investment in the road network and the uptake of remote working. The number of new vehicles that are placed on the road increases every year, and traffic accidents are on the rise as well. Bicycles and motorcycles are particularly susceptible to serious accidents on our busy roads. Mass
“The economic reasoning is clear: energy impacts everyone from consumers to businesses irrespective of their size. By maintaining stable energy prices, inflationary pressures are mitigated and the economy is at least partially insulated from the adverse effects of persistently high inflation."
PRESIDENT MARISA XUEREB
