The government expects to halve the deficit of the public finances next year as economic recovery picks up after the blow of COVID-19, Finance Minister Clyde Caruana said in his budget speech on Monday.

He explained that the economy shrank by 8.3% last year when the pandemic was at its worst. This year there will be growth of 4.8% of GDP in real terms, thanks mostly to a gradual pick-up of the tourism sector. Next year growth is forecast to be 6.5%.

Caruana said that the deficit this year is expected to be 11.1 per cent.

That is considerably more than the 5.9 per cent projected when the 2021 budget was presented. 

Caruana said the deficit will drop to 5.6% next year. He expects it to slip below the EU threshold of 3% by 2024.

The debt to GDP is expected to be 61.8% next year.

Caruana explained that Malta could not avoid heavy borrowing as a result of the pandemic. However, he said, the country was the only one in the EU which had managed to keep its labour market intact, reducing unemployment, raising the number of gainfully occupied and reducing the number of inactive persons. Unemployment was 3.6% in 2019 and 3.2% in August this year. The employment rate was 76.8% in 2019 and 77.3% this year.

Eurostat figures issued on Monday showed that Malta's deficit in 2020,  at 10.1%  was the second highest in the European Union.