Economists: government ‘in control of the economy’

Economists and experts to whom MaltaToday spoke to after Budget 2014 had words of praise for the first budget under a Labour government, saying the finance minister's projections were credible, realistic and positive.

Economists Alfred Mifsud, Lino Briguglio and Karm Farrugia said the fact that the minister was an economist by profession made a clear difference with the past.

In comments given to MaltaToday, Lino Briguglio said the only negative side of the budget was the increase of indirect taxes that will affect most the working class.

"But there are numerous other schemes intended for the working class - such as the reductions in utility tariffs - that will compensate for the indirect taxes. As an economist, I believe that Scicluna knows what he has to do for the economy to move forward. This budget will also send out a message to foreign investors that Malta is a safe place to put their money in," Briguglio said.

Asked about the projections of a 1.7% economic growth, Briguglio said this was a realistic forecast considering that economic growth in international markets is minimal, and in some cases even negative.

Of the same argument was economist Alfred Mifsud who expected economic growth to be greater than the conservative estimate of 1.7%.

"Economically speaking, this budget reached its aims for both this year and the next one. This is positive in order to avoid interference from the EU authorities. This was an important priority. The budget also includes interesting proposals that will likely increase the government's expenditure but also the economic capacity," Mifsud said.

Economist Karm Farrugia said he was surprised at the scale of the budget's realism, saying Malta had not had a similar budget for years.

"This budget was so positive that the government could have used it just before the next general election since it leaves such a feel-good factor. This is also the result of having an economist of Edward Scicluna's calibre at the helm. The projections are so credible that the EU extended the deadline to next year to reduce deficit below 3%. Malta is aiming for a 2.7% deficit, which is comfortably below the red line."

Farrugia said the government would then go on to reduce the deficit to around 2%. "As a result, this budget served to show that finally we have a government that is in control of the economy. That is a very positive sign," Farrugia said.

The budget was also well received by stockbroker and Finco director Paul Bonello, who said he was pleasantly surprised at how well thought-out the budget had been. "Ultimately, the budget is a balancing act. It's like walking on a tight-rope; with the revenue at your disposal you have to plan for the next year without endangering the economy. It was clear that this was not a bookkeeper's budget or an accountant's exercise to make ends meet. This was an economist's budget with numerous positive amendments and few negative ones. The increase in taxes will not discourage workers," Bonello said.

He also welcomed the fact that there were no populist measures that could ultimately harm the economy.  Comparing this budget to others presented by the previous Labour governments, he said that in contrast with the past this budget incorporated the element of social justice, without being antagonistic to business sectors.

Auditor and PKF partner George Mangion observed that Malta still needed to borrow €650 million in order to balance its books, saying he was disappointed that the electoral promise of simplifying bureaucracy was not given much importance. "Bureaucracy is a problem in every country that affects the rate of competitiveness. This should have been addressed: first you have to clean up your own stables before you increase the funds of government's agencies such as Malta Enterprise and Finance Malta."

Mangion described as positive the decision to re-launch the MicroInvest scheme and the setting up of a financial ombudsman, saying the latter was "much needed as an independent surveillance over MFSA after the shameful La Vallette and Fantasy Tours cases."