The 2020 budget is characterised by a multitude of tactical measures aimed at addressing thorny social issues that have accumulated in the last few years and a commitment to an economic strategy that promotes growth at all cost.
The performance of the economy in the last year was strong, with growth at historically high levels, unemployment steadily falling, national debt well within the parameters set in the Stability and Growth Pact of the EU and another healthy budgetary surplus.
The Finance Minister was, therefore, in the enviable position of being able to announce a long list of measures to help pensioners, those of low income and others struggling to get on the first step of the property ladder. It was good to see initiatives to help the more vulnerable. Edward Scicluna, in his long budget speech, tried to address the less favourable impact of this significant economic growth on the quality of life of people by announcing measures that partly address some of the worse aspects of a deteriorating environment.
The need to promote the use of green energy were acknowledged and partly addressed through measures that encourage people to invest in cleaner energy by buying electric cars.
However, the immediate environmental threats that are affecting many people today, including the deterioration of our urban and rural environment as a result of over-development, were barely mentioned.
The setting up of another agency to regulate the building industry may end up being another pious intention because of the lack of political will to enforce existing regulations meant to protect the well-being of ordinary people. The brief mention of economic strategy referred to the need for diversification into new activities, like encouraging business involved in space research to set up shop in Malta.
Attracting investors in artificial intelligence technology, e-sports and games programming are some of the other attempts to diversify. Blockchain technology still seems to be the Holy Grail of this administration’s economic strategy even if cryptocurrencies seem to have fallen out of favour.
The main weakness of the budget is the government’s failure to acknowledge the high-risk profile of some of the country’s economic activities.
With low tax incentives still one of the most powerful magnets to attract foreign direct investment, the government needs to come up with alternative strategies to attract investment based on the skills of our people rather than smart legislation.
Prof. Scicluna touched only briefly on the most imminent threat to Malta’s future economic prosperity – the reputation risk associated with doing business in Malta because of lax enforcement of laws aimed at preventing financial crime and the weaknesses of national institutions often perceived as not being truly independent.
The setting up of yet another agency to coordinate the work of the various organisations that are entrusted to act as gatekeepers against financial criminals will be of little use in restoring Malta’s tarnished reputation if it is not underpinned by a steely political commitment to ensure that regulatory oversight is effective.
The budget tried to make a virtue out of necessity by introducing overdue initiatives to ease pressure on those struggling to cope in an economy that has created many winners but just as many losers. Beyond the buzzwords and rhetoric, the budget promised more of the same vision for the future.