Deficit set to go down to 2.3% by 2012, economic growth at 1.2%

Finance Minister Tonio Fenech's budget speech today set the deficit target for end-2012 at 2.3%, a positive conclusion to the year in which the European Commission told the government to cut spending by €40 million.

At €2.8 billion revenue collected in 2012 will be 3.14% less than what was approved in last year's budget, while expenditure at €2.6 billion was 1.65% more than approved resulting in a €143,101 million recurrent shortfall.

Capital expenditure drastically fell in 2012 by 24% to €322 million, than what was originally approved in 2012.

The final deficit for the consolidated fund projected for 2012 will be €179 million, 23.7% over the original estimate of €145 million.

Fenech said the deficit will be further cut down to 1.7% in 2013, 1.1% in 2014 and 0.6% in 2015 according to the financial projections he presented.

Government debt grew from 70.89% in 2011 to 71.55% of GDP in 2012, and is expected to be trimmed down to 66.99% by 2015.

Fenech said today that he predicted economic growth to be of 1.2% in real terms, while inflation would have reached 2.3%

Fenech told the House today that the economic crisis that rattled the rest of the world had still not ended since it emerged in 2008, but said Malta had managed to stay safe in the waves hitting its shores.

"We have managed to increase the number of job placements, because year after year we addressed the most important aspects for our families and workers - work, education and health," Fenech said.

Fenech said that in the shadow of the debt problems afflicting such countries like Greece and other eurozone states, the Maltese government had managed to safeguard its own financial position to such an extent that it emerged from the Commission's excessive deficit procedure.

"This gave us the confidence necessary to prepare a Budget that includes a series of initiative that will continue to foster economic growth and job creation," Fenech said.

Malta's unemployment rate was 6.5% in 2012 compared to 11.4% in the eurozone.

Back in September, Fenech aid the government is will be revising its 2.2% deficit target for 2012 slightly, but said this would remain well below the 3% of GDP threshold set by the EU's Maastricht criteria.

Coming a day after Moody's credit rating agency said it expected Malta's deficit to rise to 2.9% by the end of 2012, it was the first time Fenech had suggested the government will not be able to reach the deficit target it set itself.

Moody's had said that although the deficit should remain below 3% of GDP, the fiscal imbalance would increase to 2.9% in 2012, before declining to 2.6% in 2013.

Malta's structural deficit has reached an unprecedented €333.3 million in the first seven months of this year, €95.1 million more over the first seven months of 2011.