The Labour party has insisted that although deficit figures fell considerably in the first two months of 2010, this was still higher by at least 8% than that for the same period in 2008. It said that this showed a higher deficit proportion in relation to GDP, which was 4.7% in 2008.
It said that in the first quarter of 2008 (i.e., in the pre-election period), had contributed significantly to the rise in the fiscal deficit during that year. The fiscal balance in the first two months of 2008 was almost 44% higher (€43m) than the deficit recorded in January-February 2007. Thus, the fiscal deficit in the first two months of 2010 still remains some €55m or 55% higher than the deficit of 2007.
Additionally, the Labour Party said that an analysis of the fiscal performance during the first two months of 2009 reveals no improvement to the underlying fiscal balance.
“The improvement in the fiscal balance during the first two months of 2010 is attributed to two factors. On the one hand, recurrent expenditure declined by 2.5%. However, this was entirely underpinned by lower outlays on the voluntary retirement schemes paid out to shipyard workers, amounting to €17.2m. Furthermore, government expenditure on medicines and surgical materials decreased by some €13.6m. This is reflected in the continuous shortage of medicine and/or the non-payment of supplies by medicine importers.”
The PL said that accounting for these factors alone, recurrent expenditure should have declined by around €31m. Thus, after accounting for the reclassification of contribution to the Malta Tourism Authority (MTA) from capital to recurrent expenditure (€7.4m), underlying recurrent expenditure increased by €12m.
“A second factor underpinning the improvement in the fiscal balance relates to the rise of 12.9% in revenue, largely spurred by higher income tax and social security contributions. This is clearly unrelated to economic activity but is underpinned by the monies collected from the tax amnesty which closed on 22 February 2010.”
The PL said that the Finance Minister indicated that the government had raised €32.4m from such an amnesty, and this figure was not yet final since according to his reply to a parliament question, the figure was expected to grow. Thus, the overall rise in ordinary revenue simply reflects a one-off increase in revenue, it concluded.
Reacting to the PL’s statement, the Nationalist Party said that Labour is still in denial about improvements in the economy.
It said that Labour keeps denying the facts that consistently show an improvement in the Maltese economy despite the international recession that has been the worst since 1929.
The PN said that the economy has been growing in the last quarter for which figures have been published, and this is positive growth not only compared to the previous quarter but also compared to the same quarter of the previous year.
It said that Malta has been attracting foreign investment amidst a deep and long worldwide recession as the government has been focusing incentives on specialized manufacturing and services sectors where Malta has a natural advantage and good prospects of future growth.
The PN deplored what it described as the “extreme doom and gloom attitude” and insisted that “hard-working Maltese families would prefer to be congratulated for the crucial contribution they played and keep playing in Malta’s undeniable relative economic success in this great recession.”
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