Evaluating 2003 and Projecting for 2004

The Economy and Public Finances
Minister Dalli said the performance of the Maltese economy during 2003 has to be seen in a scenario of a world that is going through difficult times with a weak economy and troubled finances.

"The slow economy in 2002 and 2003 brought about huge constraints on public finances as tax revenue that had been forecast on income and on consumption, as well as profits from investments were far below expectations. In Malta, apart from being hit by the same calamities that have hit other countries, we have had the traumatic experience of two elections. These did not propose simply a change in Government but also fundamental decisions that deeply regarded the strategies of all economic operators, as the two avenues that were put before our people meant totally differing strategies from those hitherto in place."

For 2003 growth is expected to be 1.5%. Next year, we are expecting improvements and we forecast a nominal growth of 3.5%. This growth should come about from increased exports, which should result from the strengthening of world economy, as well as from increased levels of investment.

Inflation
The Minister said inflation was contained and, for the twelve months ending September 2003, the mean rate was 1.1%. According to the index which has been in use since 1990, this inflation rate works out an increase of 75c per week in the cost of living. The inflation rate this year is expected to be around 1% while for next year it is being forecast at 2.3% as a result of the measures we are undertaking.

Malta's Strategy for Adopting the Euro
Minister Dalli also spoke about the adoption of the single European currency, the Euro, once Malta joins the EU.

"The significant advantages that can be derived from membership of the Euro area and the fact that Malta's economic characteristics make it well suited to join a common currency area militate in favour of an early adoption of the Euro. This being so, it would, therefore, be appropriate to take the first step by applying soon after membership next May to participate in ERM II by early 2005. A strategy that would prolong the process has its inherent dangers, in particular that Malta might lag behind other acceding countries both in terms of convergence and the catching-up process," the Minister said.

He expressed his confidence this strategy for the adoption of the Euro is realistic and the Maastricht criteria can be fulfilled on time.

Employment
"Job creation continues to be our main objective notwithstanding that this year, as a result of the weakening of the economies which are our main trading partners and of the restructuring that is taking place in all economic sectors, we had a net increase of 422 in the number of those registering for work. As economic growth next year is not expected to be strong, we still expect a level of around 5.2% registering for work."

Tourism
"Notwithstanding difficulties in tourism we retained our levels," said the Finance Minister. "We shall provide Lm10 million over four years to start on embellishment projects so that we enhance Malta's attraction so more tourists will visit us. These will further benefit those Local Councils with a tourist area in their locality."

Deficit
2003 will end with a deficit of Lm108 million, or Lm33 million more than that originally estimated, a result primarily due to lesser receipts than expected. This deficit represents 6.3% of the Gross Domestic Product.

"2004 forecasts have been placed on a new reality that we shall be living as from next year. Malta's EU membership will not only provide a better perspective for our country that will accelerate economic rhythm for the next years but it will also impact directly on our revenue and expenditure. It is expected that, next year the deficit will be at Lm95 million or 5.4% of GDP," he said.

Transparency and Control in Public Finances
"In order to strengthen transparency and control over public finances, we shall put in place a system, as from this year, whereby sub-accounts for specific activities will be created within the Consolidated Fund. These sub-accounts will be credited with tax receipts that will be wholly allocated to a particular activity. We shall insist that all costs related to that activity will not exceed the funds allocated to it," Minister Dalli reassured.

You can also discuss this year's budget on the MaltaMedia Forum.