Clyde Caruana delivered a budget in the aftermath of a global pandemic and within an economic climate which is very much moving into unknown territory globally, with war ravaging an already suffering global economy even further.
With 2021 being quite a challenging year, we saw a projected GDP increase of six per cent for 2022 and 2023, with an overall debt to GDP ratio of 57 per cent this year and an increase of 59 per cent being projected for next year, as the energy support measures really begin to kick in.
From an inflation perspective, we are looking at about 5.7 per cent after which the expectation is this will fall to about 3.7 per cent.
In social terms, the budget seems to have a number of initiatives with the hope of improving the overall well-being and standard of living, even if only temporarily.
The cost-of-living adjustment for 2023 amounts to €9.90 per week and that for pensioners will amount to €12.50 per week. There are also corrective mechanisms which see certain pensions and benefits improve as well as other mechanisms targeted at providing assistance to the elderly, the vulnerable and those suffering from mental health issues.
Within this there is also paternity leave increases, first and second time buyer assistance, investment in civil services and also increases in social benefits, grants, allowances and tax credits for parents of children with disabilities and an increase in the children’s allowance.
From a money and tax perspective, the main measures include a number of initiatives targeting pensioners, income tax rate adjustments, reduction in income tax rates for authors and a tax credit for parents of children with disabilities. We will also continue to see the government’s renowned tax refunds, ranging between €60 and €140, as well as an extension of the MicroInvest scheme.
We hoped the budget would set us up to meet the supply and economic challenges for the next five years- Justin Anastasi
There are a number of incentive schemes for businesses focusing on digitalisation, energy and water consumption savings and reduction of waste. We will also continue to see incentives relating to the purchasing of electric vehicles and other means of clean transport, the scrappage scheme, PV panels for residential houses and renovations of private sector buildings.
So some good things in there but if you were to go through this article and then went on to read the budget document in its entirety what you would notice is a substantial amount of words such as “extension” and “continue”, all of which give a solid impression that this budget is very much an unoriginal and more of the same.
We have to ask ourselves if this government has really given enough visionary essence, thought and time to what could be our last real chance to curve a cost-of-living crisis.
Now what is missing you might ask. Well, good question. From my perspective, we currently have a situation which revolves around supply and demand. The government seems to have washed its hands of that and has actually focused on increasing demand. Which is all well and good, however, with the government leaning on employers more and more, and the absence of focus on the supply aspect, this will most likely result in prices continuing to increase.
So I would have expected to see more of an effort being put on developing local produce, incentives and cuts for agriculture, farmers, really boosting efforts to produce products locally, a reduction on VAT, the creation of new and more advantageous import channels, incentives on importation, reduction in work permit bureaucracy and incentives or schemes for self-employed, just to name a few.
In short this is a B+ for a budget we were all hoping would have set us up to meet the supply and economic challenges of not just 2023 but for the next five years.
Justin Anastasi is a director at We Consult You.