The European Commission has assessed Malta’s new updated convergence programme covering the period between 2005 and 2008.
In its report, the Commission stated that Malta seems on track to correct the excessive deficit by 2006, provided that the budget is fully implemented and the macroeconomic risks are duly addressed.
It also said that thereafter, the adjustment towards the medium-term objective (MTO) is in line with the Pact’s benchmark and the objective should be within reach in 2008. It explained that this will provide a safety margin against breaching the 3 per cent ceiling with normal macroeconomic fluctuations.
The Commission’s report also noted that the debt ratio, estimated at close to 77 per cent of the Gross Domestic Product in 2005, is planned to start declining in 2006, to attain 67¼ per cent of GDP by 2008. The Commission remarked that Malta is at a medium risk with regard to the impact of the ageing of population on the long-term sustainability of its public finances.
The report concluded that overall, the programme is consistent with the correction of the excessive deficit by 2006. However, it reiterated that it would be appropriate for Malta to implement rigorously the 2006 budget in order to ensure its correction this year; to ensure that the debt ratio declines towards the 60 per cent of GDP reference value at a satisfactory pace from 2006 onwards; and to improve long-term sustainability by making further progress in the design and implementation of the pension reforms.
Read more about this year's budget on MaltaMedia's special feature: Malta Budget 2006.
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