Budget Should Be An Opportunity To Capitalise On Past Successes And Plan Long-Term

18th September 2018

Chamber proposes to Government a series of recommendations, in thew run-up to Budget 2019, following an internal consultation process collecting feedback from committees and individual members. 

As is customary every year, the summer months for the Malta Chamber mean a thorough and comprehensive analysis of the economic, social and environmental situation in the country, in view of the financial Budget of the upcoming twelve-month period. With no exception, the Chamber has proposed to Government a series of recommendations, following an internal consultation process collecting feedback from committees and individual members. In total the Malta Chamber made 30 key recommendations which include well over 60 practical measures for inclusion in the Budget document for 2019.

In its 2019 pre-budget document, the Malta Chamber acknowledged the fact that Malta is currently experiencing a buoyant economy featuring unprecedented growth rates, consecutive fiscal surpluses, relative price stability, and full employment. In fact, the Chamber reiterates its call on Government to capitalise on the present economic resilience to invest in the necessary infrastructure and safeguard future sustainability.

At the same time, the Chamber calls for further competitive enhancing measures with a view to protect the recent economic achievements and ensure further sustainable growth.

The context in which the Budget for next year is being designed, is that of a dynamic business environment characterised by numerous internal and external challenges. These include tough negotiations on the next EU Multi-Annual Financial Framework, tighter EU rules and regulations such as the CCCTB which could be seen as prelude to increased tax harmonisation at EU level, increased migration pressures, the election of populist Governments in some of our closest partners in Europe, ongoing political and economic turmoil in the neighbouring Maghreb and Middle East, ongoing trade wars between the country’s competitors namely the US and China and the looming prospects of ‘BREXIT’ just to name a few.

All of the above, compounded with the need to reform traditional segments of the economy which require major restructuring and ongoing economic, social and environmental pressures exerted by an increased foreign population resident in Malta and tourist arrivals, will continue to result in major challenges for Malta to retain the current growth momentum.

While people may have grown accustomed to annual growth rates exceeding 5 percent, economic theory holds that economic cycles are made of peaks and troughs. Expectations need to be managed in a number of sectors to ensure sustainability.

The Chamber is of the belief that policy makers at a national level must be made aware that, in spite of the positive economic results achieved in the last years, there are weaknesses which need to be addressed.

Besides, as miantained above, there exist a number of long-term threats that must be properly addressed through effective action plans. At the same time, Malta remains very strong in a number of areas while notable opportunities exist for the country’s taking, in order to maintain this positive momentum in the longer term.

With this in mind, the Malta Chamber, once again calls on the authorities to address the Budget from a multi-annual perspective. This would be closer to what happens at a European Union level where a seven-year multi annual financial framework is drawn. This would entail planning well ahead on what is required in the medium to long term rather than looking at the budget as purely an annual fiscal exercise.

Government should take this opportunity to initiate a thorough impact assessment of the country’s ongoing growth with a view to set sustainable targets for maximum carrying capacities and output levels, in the country’s economic segments. This study would further recommend a way forward towards reaching the set output levels and maximising returns with the highest efficiency of resources.

Once this analysis is concluded, a national debate on a new long-term economic, societal and environmental master plan for the country post 2020 would be in order.

The above proposals are being made in the context that the country has now managed to achieve a budget surplus, full employment and relative price stability. In the coming years, the Chamber believes that fiscal policy should seek to finetune elements of the redistribution process whilst concentrating on the optimum allocation of resources in the public sector and ensuring the right fiscal environment for the private sector to do likewise. Consequently, the country could benefit from efficiencies that allow it to increase output and wealth sustainably with a constant level of applied resources.

The Chamber is also in agreement with the Government’s declared objective of quality which is expected to characterise the upcoming Budget. The theme of quality was already mentioned extensiveily by the Chamber in its Economic Vision for Malta 2014-2020 which it had published as a business plan for Government.

The Malta Chamber, believes that this is the opportune time to capitalise on the successes of recent years and plan long-term where we want to take our country. These are exciting times indeed and the Chamber is all too pleased to once again be an integral part of the process.

This Editorial was originally published on the Commercial Courier.

Budget Should Be An Opportunity To Capitalise On Past Successes And Plan Long-Term