A budget of continuity - JP Fabri and Nicky Gouder

The budget presented yesterday by the government was characterised by continuity, the extension of existing schemes and starting work on projects already announced in the earlier mini and emergency budget. It does provide an economic stimulus through public and private investment while supporting the most vulnerable in our society. Yet, the challenges ahead of us remain.

The government is recognising the need for a longer-term vision for the Maltese islands and, although not much is said; it declared it will be delivering on a 10-year vision focused on good governance, a greener economy as well as innovation and digitalisation.

This is a good and a much-needed start, however, a broad consultation process is needed to truly future-proof our economy.

Mention was made on transforming our current industries and attracting new sectors.

While attracting start-ups is positive and there is talk of a venture capital fund, this has been in the offing for quite some time. We believe that a focus on creating the right ecosystems through initiatives such as start-up visas and access to finance would have been welcome and needed.

In terms of key industries, including the digital economy and financial services, the measures are limited.

One looks forward to the publication of the national digital strategy, which should set the roadmap for this sector to further develop.

In terms of tourism, there was no reduction in VAT, as other countries rolled out, but the continuation of schemes already launched, including the wage supplement. A new tourism strategy is also in the pipeline and one hopes it will give the sector a renewed impetus post-COVID-19.

Measures supporting the property market were also extended and will support this sector in the months to come.

Most of the tax-related measures were extensions of existing measures, rather than the introduction of new ones.

Most of them relate to the tax reductions on transfers of immovable property, which have been extended until December 31, 2021.

The increase in the VAT exempt threshold to €30,000 is a positive move. Our main proposal before the budget was the gradual reduction of Malta’s corporate tax rate to 25 per cent over a five-year period and we believe this would have incentivised local companies to re-invest their profits, particularly in the coming years.

A broad consultation process is needed to truly future-proof our economy

The scheme aimed at supporting innovative projects is, however, welcome in this regard.

There is a positive move towards a greener economy and investments towards this sector which can generate quality jobs and economic activity.

The framework for green bonds, although mentioned in last year’s budget, is welcome and one would hope to attract a growing international sector to our shores and not only have local companies aiming to invest in the green economy.

The other measures announced in the budget are very welcome and are steps in the right direction.

On the social side, support is being given to the vulnerable cohorts of our society, including pensioners. The measures launched and the support given are aimed at strengthening such sectors that have not benefitted from the economic growth registered in the past.

In terms of education, investment in school and tertiary facilities was announced, however, key challenges to reduce the rate of early school-leavers, enhance STEM students and increase the number of those continuing education remain.

The focus on health also evolved around infrastructural development with the upgrading of health facilities and a much welcome psychiatric hospital.

There was a renewed focus on infrastructural development, including road building and plans to significantly invest in industrial infrastructure, as launched earlier this year.

It is good to see an effort towards the regeneration of abandoned sites through public private partnerships, which should also stimulate investment.

It is now of utmost importance that the incentives and measures announced are rolled out and implemented swiftly and efficiently. Resources need to be redeployed accordingly to ensure that such measures truly stimulate the economy and see the light of day as, otherwise, they will not have their intended effect.

We are living through highly uncertain and volatile times.

This budget provided a continuity exercise with the extension of numerous schemes and incentives. It continues to aim for the stabilisation of economic activity, however, the coming months will be critical for the government to launch the numerous strategies and vision documents it announced.

The challenges facing our economy remain and they are significant.

JP Fabri and Nicky Gouder, founding partners of Seed Consultancy