The uncertainty surrounding the medical developments of COVID-19 are impacting governments’ ability to plan their budgets for 2021 and beyond.

Malta’s government, however, faces an additional challenge. Our open economy depends more on how other countries manage the pandemic and its economic consequences rather than what the government does locally to support the economy.

The 2021 Pre-budget Document contains no substantial surprises. It is peppered with caveats aimed at tempering the expectation of a quick return to normality. It also has the usual dose of buzzwords, platitudes and clichés that have become a permanent feature in the narrative of budget documents.

After seven years of improvement in fiscal statistics, Malta will experience some deterioration in GDP growth, national debt and unemployment as a result of the pandemic. The money pumped into the economy earlier this year has undoubtedly helped to support employment, especially in the services industries supporting the tourism sector.

However, rather optimistically, the government is still basing its economic forecast on a V-shaped recovery starting in the third quarter of 2020.

One positive aspect of the government’s strategy to tackle the pandemic crisis is that there are no short-term plans to increases taxes. This tactic is understandable both from an economic and political perspective. The last thing any country wants in the present extraordinary circumstances is a return to austerity to rectify fiscal aberrations.

With elections fast approaching, it is not surprising that the government will want to do very little to upset the electorate with plans to shore up its finances.

The short-term strategy for economic recovery in 2021 is mainly based on stimulating public consumption and gross fixed capital formation.

Put simply, the government will keep supporting measures to encourage employers to retain their staff. It also means that infrastructure projects that were delayed as a result of the pandemic in 2020 will be energised next year.

The narrative of the pre-budget document gets rather dull when it delves in the government’s strategic initiatives for next year and beyond. Once again, there is a repetition of the mantra on the pillars that will support the sustainability of the Maltese economy in the years to come.

In reality, the emphasis on the present business model is the same as it has been for the past seven years: more electronic gaming and ‘innovative’ technologies like blockchain, artificial intelligence and cryptocurrencies; more financial services albeit with more emphasis on stricter enforcement of regulation; and more mass tourism that is stretching the infrastructural resources of the country to the limit.  

One interesting novelty is the declared intention to clean up the public procurement process that has been so notoriously abused in the past few years as evidenced by the power station and hospital projects.

The pre-budget document’s strength is that it does not contemplate any shock tactics to bring back public finances to the performance levels experienced before the pandemic. Its weakness is that there is hardly any evidence of the government’s action plan to underpin the future of the economy with sustainable strategies.

Malta’s Sustainable Vision 2050 remains a declaration of pious intentions until there are clear indications of the choices the country needs to make this vision a reality.

The novel coronavirus pandemic focuses the attention of the government on short-term issues. Action plans to address the long-term problems remain unconvincing.