Government is forecasting that it will remain in a budget deficit at least until 2025. Government is forecasting a public debt level that will go from over €8 billion in 2021 to around €12 billion in 2025, with an annual deficit of almost €1 billion forecasted for 2022 and 2023. This will mean that the annual deficit to GDP rate is expected to remain above the annual 3% rate until 2024, with this being around 4% – 5% in 2023 and 2024.

The forecast is that the public debt will remain below 60% of GDP, as the GDP is forecast to grow from just over €16 billion in 2022 to almost €20 billion in 2025.

It is interesting to note that while Government forecasted, last year, an annual public deficit to GDP rate of 5.6% for 2022 this will now likely stand at 5.8%. However, a closer look at the figures shows that this is due to a higher GDP level for 2022 which is forecasted to be at just over €16 billion instead of just over €15 billion as forecasted last year. This means that public deficit in 2022 is forecasted to be €948 million against the €850 million forecasted last year. So hadn’t the GDP level not grown by about €1 billion in 2022 over what was forecasted last year, we would have had a much larger % of annual deficit to GDP.

GDP growth is expected to be 6% in real terms in 2022 and this growth is expected to be lower in 2023 at the level of 3.5% in real terms. Government is forecasting an increase in 3.4% in employment in 2023 and a lower inflation level of 3.7% as the increase in prices is expected to the more moderate next year.

Government is forecasting that to subsidy energy and grains, the expense will be of over €600 million in 2023. This means an expense of €70,000 per hour and almost 10% of the annual public expenditure.

Below please find a summary of various measures announced in the budget speech:-

A. Social Measures

• In 2023 Government will increase the children allowance by €90 for each child. This measure will effect 41,100 families with 62,000 children for an added expense of €5.6 million.
• 80,000 individuals or 37,000 families will also get an additional COLA based on a inflation based mechanism.
• Pensions will be increased by €12.50 per week including COLA. This will mean that each pensioner will see an annual increase of €650 in their pension, for about 100,000 pensioners – an increased expense of some €65 million.
• COLA Increase will be of €9.90 per week in 2023, for all employees.
• The Carers Grant for those parents who cannot work to take care of disabled children will increase from €500 to €4,500 per year.
• A €10,000 grant over 10 years will be given to first time buyers of property that does not exceed the value of €500,000. This measure will apply for property bought from 1st January 2022 onwards.

B. Labour Market & Training

• The Tax refund that was introduced in recent years, will be given again in 2023, which will be between €60 and €140 per person.
• Pensioners who keep working beyond retirement age will see that 20% of their pension income will not be considered as taxable income in 2022 (year of assessment 2023). This will increase to 40% in 2023 (year of assessment 2024). This measure will cost €27 million and will see 17,000 pensioners benefit from this.
• A new laptop to be given to each student in the 7th grade as from next scholastic year.
• €10 million for various training schemes like the “Investing in Skills” scheme.

C. Economic Incentives

• A one stop shop for start-ups will be launched next year, under the brand “Start in Malta”.
• From 2023, cash grants of about €40 million will be offered to SMEs. These grants are linked with investments targeted for SME businesses under “Business Enhance” Scheme, which are EU funded.
• Malta Enterprise will double the financial assistance in the form of cash grants for those Maltese companies in digital projects that are sustainable. The grant will cover 50% of the eligible investment to a maximum of €100,000.
• Maltese companies will also see tax credits doubled to a maximum of €40,000 in tax credits when they invest in projects related to reduction in energy consumption, water usage and increased in efficiency by using less material resources or wastage.
• The concession for Family Business benefitting from a reducing in transfer duty from 5% to 1.5% when transferred “intervivos” will be extended once more.
• The rent assistance for greater warehousing will be continued and increased to €50,000 per year instead of €25,000 per year and the period from which businesses can benefit from this scheme has been doubled from 3 year to 6 years.
• A new incentive being worked with the Gozo Tourism Association to attract more tourists to Gozo during the winter months
• A business plan with regards Air Malta was presented to the EU commission, which is now evaluating the various options in this plan. Difficult decisions need to be taken to make sure that Malta has a national airline that does not incur financial losses.
• The scheme for shops that are presently rented or leased out from Government (Lands), outside of Valletta, will be opened once again, with the aim of giving them a 45 year lease.
• The EU’s RRF Fund will be used heavily on digitilisation – with a €10 million investment for the justice sector and €6 million for the maritime register.

D. Sustainable Development

• The schemes offering reduced stamp duty for first-time buyers, second-time buyers and property bought in Gozo, will be continued.
• Shifting the Malta Bus Fleet to being almost all electrified
• The financial assistance for new electric cars will be continued whereby this will be €11,000 or €12,000 if another vehicle is scrapped.
• The grants for plug-in hybrid where used up by the end of May 2022. So if anyone order a plug-in hybrid car beyond May 2022 and this has not been delivered yet and this will be delivered in 2023, will still get the grant of €11,000.
• The financial grant for scrapping old cars will remain of €2,000.
• The scheme that allows that registration tax is exempted, and the annual licence fee is exempted for 5 years on electric and plug-in hybrid cars will also be extended.
• Discussions are being held with the EU Commission on a public service agreement with regards a Gozo Fast Ferry Service, for the next 2 years

E. Green Economy

• Incentive schemes with regards the installation of solar panels and energy conservation batteries, heat pump water heaters and the restorations of old wells. A 8MW feed-in tariff will be allocated for a feed-in tariff for solar photo voltaic cells at home, whilst extending this feed-in tariff for 20 years.
• We will have 1,200 electric charging points for electric cars by 2024, up from te 340 we have now.
• With regards waste, Multi-Material Recovery Facility will start operating from Ħal Far in 2023. Next year will see the launch of a new project worth €50 million with regards an Organic Processing Plant.