Malta – €52 Million Deficit in 2023
The National Statistics Office (NSO) recently released financial data for the period spanning from January to September 2023. The figures unveiled a deficit of €52 million, marking a concerning trend for Malta’s fiscal health. This revelation comes after the announcement that in 2022, Malta reported a deficit of €982.2 million, equivalent to a significant 5.7% of its Gross Domestic Product (GDP). In this article, we delve into the implications of this deficit and the challenges facing the Maltese government in the coming months.
A Daunting Fiscal Task Ahead
With a deficit of €52 million, Malta’s Labour government is facing a considerable challenge. The deficit is a matter of great concern, as it exceeds the European Union’s Maastricht criteria, which stipulate that member states should keep their deficit at no more than 3% of their GDP. The ongoing suspension of these criteria, which was introduced in response to the Covid-19 pandemic, is set to end soon. This impending change adds to the urgency of addressing the budget deficit.
Revenue on the Rise
The deficit in September 2023 is particularly alarming when contrasted with the revenue generated during the first nine months of the same year. Recurrent revenue reached an impressive €4,742.6 million, representing a substantial increase of €670 million compared to the previous year. This boost in revenue is a positive sign, but it also raises questions about how such a significant deficit could persist.
Notable Revenue Surges
Several revenue streams experienced notable surges during this period. Income Tax contributed an additional €411.1 million, while Social Security saw a boost of €80.0 million. Grants also played a part in this revenue increase, adding an additional €77.2 million to the government’s coffers. These increases are undoubtedly significant, and they contribute to the overall financial picture of the country.
However, the increase in revenue wasn’t matched by a corresponding restraint in expenditure. Total expenditure for the same period amounted to €4,794.6 million, reflecting a growth of €219.1 million from the previous year. This increase in spending demands closer examination, especially in the context of a growing deficit.
Surging Recurrent Expenditure
Recurrent expenditure, a significant component of government spending, stood at €4,158.3 million. This marked a substantial increase of €144.3 million compared to the end of September in the previous year. This surge in expenditure is a matter of concern, particularly when looking at the breakdown of expenses.
Understanding the Rise in Expenditure
A detailed analysis of the expenditure reveals that Contributions to Government Entities accounted for a significant portion of the rise, with an increase of €55.6 million. The Programs and Initiatives category also saw increases in spending on Social security benefits (€77.2 million), Medicines and surgical materials (€28.7 million), and Energy support measures (€21.3 million). However, it’s important to note that these increases were partly offset by decreases in expenditure under pandemic assistance schemes and economic stimulus payments.
Rising Debt Service Costs
One of the noteworthy aspects of the fiscal report is the increase in the interest component of public debt servicing costs, which reached €154.2 million. This marked an increase of €28.0 million compared to the previous year. This rise in debt service costs is another factor contributing to the deficit and is worth further examination.
Government's Capital Spending
The government’s capital spending amounted to €482.1 million between January and September 2023, indicating a €46.8 million increase from 2022. This growth in capital expenditure was driven by higher investments in various initiatives, including the REPowerEU initiative, Property, plant and equipment, and National Identity Management Systems. Understanding where the government allocates its capital budget can shed light on its financial priorities.
A Silver Lining in the Deficit
Although a deficit of €52.0 million was reported in the Government’s Consolidated Fund by the end of September 2023, this figure reflects a decrease in the deficit of €450.8 million compared to the same period in 2022. This change primarily mirrors an increase in total recurrent revenue (€670.0 million), partially offset by rises in total expenditure, including recurrent expenditure, interest, and capital expenditure.
The Challenge of Growing Debt
Central Government debt in Malta amounted to €9,358.9 million by the end of September 2023, representing an increase of €842.3 million compared to 2022. This significant growth in government debt is attributed to higher Malta Government Stocks and other contributing factors. The burgeoning debt is an issue that demands the government’s attention.
FAQ: Understanding Malta's Fiscal Situation
What is Malta’s deficit for the period of January to September 2023?
Malta reported a deficit of €52 million during this period.
How does this deficit compare to 2022’s figures?
In 2022, Malta reported a deficit of €982.2 million, equivalent to 5.7% of GDP, which is significantly higher.
What is the EU’s Maastricht criteria, and how does it relate to Malta’s deficit?
The Maastricht criteria oblige member states to maintain their deficit at no more than 3% of GDP, but these criteria have been temporarily suspended due to the Covid-19 pandemic.
What contributed to the increase in recurrent revenue for Malta in 2023?
Recurrent revenue saw a substantial increase of €670 million in 2023, with notable contributions from Income Tax, Social Security, and Grants.
Which areas experienced notable expenditure growth during the first nine months of 2023?
Recurrent expenditure, Contributions to Government Entities, and various programs and initiatives, such as Social security benefits, Medicines, and Energy support measures, saw increased spending.
What is driving the rise in interest costs related to public debt servicing?
The interest component of public debt servicing costs increased by €28.0 million in 2023, contributing to the overall deficit.
Where did the government allocate its capital spending in 2023?
The government directed its capital budget towards various initiatives, including the REPowerEU initiative, Property, plant and equipment, and National Identity Management Systems.
Has there been any improvement in the deficit compared to the previous year?
Yes, there has been a decrease in the deficit of €450.8 million compared to the same period in 2022, primarily due to an increase in recurrent revenue.
How much has Malta’s government debt grown in 2023?
Malta’s central government debt increased by €842.3 million, reaching €9,358.9 million by the end of September 2023.
What are the main factors contributing to the growing government debt in Malta?
The increase in government debt is mainly attributed to higher Malta Government Stocks and various other factors.