The government deficit has hit €1 billion due to the impact of COVID-19 on the economy in the first seven months of the year.

At the end of August, the deficit in government's consolidated fund stood at €1,086.2 million, the National Statistics Office said. In the same period last year, the country reported a surplus of €83 million. 

The figures come weeks before the 2021 budget is due to be announced. Finance Minister Edward Scicluna has already warned that the deficit will continue in to next year

A drop in revenue - with the largest decrease being from income tax - and an increase in expenditure led to the huge deficit. 

"Decreases in revenue and increases in expenditure reflected developments related to COVID-19," the NSO said.

Shortly after the first case of COVID-19 emerged in March, the government announced a shutdown on shops, restaurants, bars and travel by air and sea that was not lifted fully until mid-July. 

Meanwhile, a series of economic measures were also implemented by the government to help businesses and individuals impacted by the shutdown. 

This public spending boost is reflected in the figures, which show almost €3 billion in recurrent expenditure, a rise of almost 10% from the previous year. 

The main contributor was an almost €140 million rise in spending on "programmes and initiatives".

On the other hand, recurrent revenue dropped by 20%, year on year. In the first seven months of the year, recurrent revenue amounted to €2.5 billion compared to €3 billion by August 2019. 

Income tax exhibited the largest decrease at €235 million.

Between January and August 2020, total expenditure amounted to €3 billion - 16.3% higher than in the same period.

Social security benefits saw an outlay of €50.7 million, of which €14.5 million were spent on COVID-19 social benefits.

The rise in expenditure was partially offset by drops reported under social security state contribution (€28.3 million, also reported as revenue) and EU  resources (€18.2 million).

At the end of August, central government debt stood at €6.6 billion, a €1.2 billion rise from the previous year.

Increases reported under Malta government stocks (€587.3 million) and treasury bills (€502.7 million) were the main reasons for the rise in debt. Higher debt was also reported under the 62+ Malta Government Savings Bond (€91.5 million) and euro coins issued in the name of the treasury (€2.9 million).

In contrast, lower debt was registered under foreign loans (€0.1 million). Higher holdings by government funds in Malta government stocks also resulted in a decrease in debt of €4.6 million.

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