Update 2 | PN flags high first-quarter deficit, Scicluna lauds ‘robust growth’

General government recorded a deficit of €172.3 million in the first quarter of 2015.

During January-March 2015, total revenue stood at €754.6 million, an increase of €59.1 million over the first quarter of 2014, driven by taxes on production and imports (€28.7 million), current taxes on income and wealth (€17.5 million) and net social contributions (€8.9 million).

Total spending grew to €926.8 million from higher outlays on gross capital formation (€31.8 million), capital transfers payable (€26.3 million) and compensation of employees (€17.2 million).

Shadow finance minister Mario de Marco said that the statistics confirmed government’s expenditure was increasing and contributing to the increase in deficit and debt levels.

Total government debt outstanding at the end of March increased by €143 million over 2014, totalling at €5,640.6 million, of which €5,636.7 million was related to central government. The increase was underpinned by Malta Government Stocks of €293.6 million, while short-term loans went up by €13.5 million, and short-term debt securities and long-term loans declined by €159.1 million and €10.4 million respectively.

“The Opposition reiterates its appeal to government to maintain a tighter control over government expenditure and to direct its energies towards sectors that can add real value to our economy in the long run rather than on measures that benefit the chosen few,” de Marco said.

He said the deficit in the first quarter of 2015 at €172 million was highest first-quarter deficit recorded since 2011, citing public sector wages as one of the main drivers.

Public sector salaries shot up from €238 million in the first quarter of 2013 to €257 million in the corresponding period in 2014 to €275 million in 2015.

“This means that the wage bill for just the first three months of the year increased by nearly €40 million in a space of two years. This increase in wages is not the result of a new collective agreement, but is driven by the increase in public sector employment and the high wages being paid to people close to government,” de Marco said.

“This employment is not resulting in any tangible benefits to the consumers. If anything, it is contributing to what the Prime Minister described as ‘silly mistakes’ that are costing the countries tens of millions of euros,” he continued.

De Marco added that the rate of increase in government spending was, according to Eurostat, the second highest in the EU.

“This confirms the concern expressed by the Opposition that the country’s economic growth is being fuelled by government expenditure. While it might reap short-term results, it cannot be sustained in the medium or the long-term. Government-induced costs are increasing and putting more strain on government’s finances, and exports and industrial production are declining and are now a fraction of what they were two years ago.”

Robust growth in private consumption

On his part, finance minister Edward Scicluna said the figures, namely the increase in revenue, reflected the robust growth in private consumption, and te increase in revenue from current taxes on income and wealth and net social contributions "on the back of dynamic performance in the labour market largely thanks to government’s success in making work pay and easing access to the labour market."

He said the increase in spending was recorded in investment which increased to €94 million reflecting the start of various infrastructural projects. “The increases in both revenue and expenditure are in line with government fiscal targets. We are also pleased to note the strong increase in the tax base, namely income and consumption which is reflective of the increasingly strong performance of the Maltese economy.”

The deficit of €172.3 million included one-off adjustments of €86.9 million mainly due to EU funded projects and the Air Malta loan to equity injection.

Other data

Currency and deposits registered an increase of €84.6 million over the previous quarter. Conversely, long-term loans decreased by €50.5 million while other accounts receivable decreased by €20.6 million. Moreover, equity and investment fund shares and short-term loans decreased by €6.3 million and €0.3 million respectively.

With regard to financial transactions in liabilities, the major increase was recorded in long-term debt securities, €167.2 million. Short-term debt securities and Short-term loans added €67.7 million and €0.6 million respectively. Moreover, Other accounts payable and Long-term loans decreased by €46.3 million and €13.4 million respectively, while Currency and deposits decreased by €0.1 million.

The euro coins issued in the name of the Treasury, which are considered as a currency liability pertaining to the Central Government, amounted to €60.3 million, a rise of €5.3 million over the euro coin stock recorded at the end of March 2014. In addition, the Local Government debt went up by €0.1 million and stood at €4.0 million.