Last Wednesday, the Malta Fiscal Advisory Council (MFAC) presented to the Minister for Finance and Financial Services its assessment of the Annual Report and Half-Yearly Report that were published by the ministry this year.
It said both reports contribute positively to fiscal transparency by providing an account of the outturn of the previous year compared to the targets, and by outlining any forecast updates for the current year.
The Fiscal Council noted that in 2019, nominal GDP growth was below that which had been indicated in the Draft Budgetary Plan and the Update of Stability Programme. This factor is likely to have contributed to the miss in the revenue targets for the year. Consequently, in 2019, the fiscal balance remained in surplus, but was lower than projected.
The council also noted that the half-yearly report reproduced the macroeconomic forecasts that had been presented in April (as part of the Update of Stability Programme), whereas the fiscal projections were revised to a larger fiscal deficit and higher public debt.
The council said that it understands that as part of next year’s Budget preparations, the ministry is closely analysing the 2020 second quarter GDP statistics, when the full force of the COVID-19 restrictive measures were in place, and the possible implications for Malta’s macroeconomic and fiscal outlook for the year as a whole.
It also took note of the recommendation adopted by the European Council on July 20 wherein member states were advised that: “In line with the general escape clause, take all necessary measures to effectively address the pandemic, sustain the economy and support the ensuing recovery.
“When economic conditions allow, pursue fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment.”
The Fiscal Council’s full report, entitled ‘Assessment of the Annual Report 2019 and Half-Yearly Report 2020’, is available on the MFAC website at http://www.mfac.org.mt.