Malta’s budget plans endorsed by EU finance ministers

Malta’s medium-term budget plans to reduce the annual deficit and keep a prudent debt-to-GDP ratio have received the green light from EU finance ministers.

The ECOFIN council on Tuesday greenlighted the net expenditure paths and medium-term fiscal-structural plans of Malta, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Greece, Ireland, Italy, Latvia, Luxembourg, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.

For the five member states that requested an extension of the fiscal adjustment period to seven years (Finland, France, Ireland, Italy and Romania), the Council also endorsed the set of reform and investment commitments underpinning this extension.

The endorsement comes under the EU's new economic governance framework, introduced in April 2024, which aims to bolster fiscal stability through enhanced monitoring and investment strategies.

Malta's plan focuses on reducing the government deficit to below 3% of GDP by 2028 while maintaining public debt levels on a gradual downward trajectory. Currently, government debt stands at 49.2% of GDP and is projected to decline to 48.8% by the end of the adjustment period in 2028, well below the recommended 60% threshold.

Economic growth, which stood at 7.5% in 2023, is expected to moderate to 5% in 2024 and 4.3% in 2025, driven by strong domestic demand and robust export performance.

To maintain fiscal discipline, the plan caps net government expenditure growth at an average of 5.9% annually between 2025 and 2028, aligning with EU benchmarks.

The deficit’s downward trajectory is expected to be maintained notwithstanding government’s generous subsidies to keep energy and fuel prices stable. The government is also projecting a reduction in the deficit for 2025 despite a significant tax cut that comes into force this month and generous increases in pension payments and Children’s Allowance disbursement.

Meanwhile, in a statement the Finance Ministry said the Council’s endorsement was “another certificate of trust” in the Maltese government’s fiscal targets.

“The budget is intended to see the country go to the next level in view of important environmental and digital changes. The government is committed to continue administering public finances in a prudent way to generate economic growth that will generate wealth for Maltese and Gozitan families,” the Finance Ministry said.