As Malta managed to flatten the curve of COVID-19 cases, focus quickly had to turn to reviving and stimulating the economy to support its recovery from the negative shock it faced. The economic regeneration plan, announced by the government on Monday, was precisely aimed and designed to kick-start economic activity.
The stimulus package can be seen as having three main pillars; bolstering consumer confidence, supporting local businesses and investing in long-term infrastructure. We are confident that these pillars will offer the right short-term impetus to the economy.
One of the main aims of the package was to incentivise consumer spending and local demand. Various measures were introduced including vouchers to be spent in the local economy; lower property taxes, increased in-work benefits and lower fuel costs are all expected to support disposable income and stimulate consumer spending.
Domestic demand and consumption have been the motors of the economy over the past few years and this package of measures is expected to restore confidence in people.
This set of measures constitutes a major direct injection into the economy which is expected to boost local consumption and also support the worst-hit industries mainly accommodation, hospitality and retail.
Supporting local businesses is another strong theme and pillar of this package. The extension of the wage supplement has given businesses a sense of security which will allow them to plan and also to consider reinvestment. Reducing the overall running expenses is a recurrent theme and the rent and utility bill subsidies will definitely go a long way in supporting businesses.
Other measures include the conversion of tax credits to cash grants, internationalisation support through export credit guarantees, waiver of licences and additional allocations aimed at supporting training of employees.
The lowering of property tax and investment-support measures targeting construction companies are expected to further bolster this industry.
The reduction in port charges will help local importers and the measure aimed at underwriting bonds when being rolled-over is aimed at ensuring investor confidence and financial stability.
In addition to this direct injection, the government is also embarking on infrastructural projects that are aimed at upgrading Malta’s industrial capacity through the extension and creation of industrial parks that are aimed at particular niche sectors including life-sciences. This investment programme, together with other infrastructural projects underway, will further support economic activity in the coming months and years.
This regeneration package will definitely kick-start the local economy- JP Fabri and Nicky Gouder
The announced stimulus package is a robust and solid set of measures which are targeted and timely. We believe that there could have been a bigger emphasis on green recovery with investment incentives aimed at alternative energy including electric cars.
Also, measures to facilitate the reintroduction of unemployed people in the workforce need to be launched and this should include reskilling programmes. However, this regeneration package will definitely kick-start the local economy through the interplay of consumer demand, business growth and public investment.
Going forward, Malta will have additional resources to support the economy, including the European recovery plan which is currently being negotiated. The new package of European funds will also be agreed upon later this year and the annual national budget will be presented towards the end of the year.
Let us use these additional funds wisely. The country needs a sustainable long-term vision which should guide the use of such funds. Key challenges that the country faces should be addressed through these additional packages.
Higher investment in education, innovation, mass-transit system, green infrastructure and a true digital transformation that will see Malta emerge as a digital society need to be national priorities. A review of legal and regulatory frameworks should be undertaken to ensure that Malta remains attractive and competitive in regulated industries.
In order to thrive, our country needs to continuously transform itself and a collective vision to do so in a targeted manner is also timely.
JP Fabri and Nicky Gouder are founding partners of Seed Consultancy.