A government spending watchdog has acknowledged that the impact of Malta’s FATF greylisting remains “highly uncertain” and difficult to ascertain.

In a 100-page assessment of the government’s budgetary forecasts for next year, the Malta fiscal advisory council highlighted the greylisting as one of the factors that could affect economic projections for 2022.

The government is forecasting improved economic growth and a reduction in its spending deficit for 2022.

Malta was placed on the FATF’s grey list in June over concerns about the government’s efforts to fight financial crime.

The fiscal advisory council said the potential impact is also dependent on the amount of time Malta spends on the grey list.

FATF president Marcus Pleyer said in October that Malta was making “good progress” in implementing its action plan to see it removed from the grey list.

Apart from unknowns about the greylisting, the council says the COVID-19 pandemic could also impact the government’s economic and fiscal projections.

The council says the forecasts are “strongly dependent” on the assumption that the pandemic is gradually subsiding, both in Malta and globally.

FATF president Marcus Pleyer. Photo: Faebook

“This depends entirely on health-related factors upon which it is very hard to hypothesise about with any certainty,” the council says in its report.

Malta has over recent days experienced a surge in COVID-19 cases, with the government already announcing it will extend the costly wage supplement till the end of January.

The supplement was meant to end in December.

Prime Minister Robert Abela said on Thursday the supplement would be extended further if necessary.

The council said the government’s commitment to contain its spending as the pandemic eases and the economy recovers is the central premise underpinning the macroeconomic and fiscal projections in the 2022 budget plans.  According to the forecasts, the government plans to slash its deficit-to-GDP ratio from 11.1 per cent this year to 5.6 per cent in 2022.

The council says, however, that the target could be missed due to a possible shortfall in total revenue and actual expenditure exceeding forecasts. It encouraged the government to start rebuilding fiscal buffers to counteract any future adverse shocks and to enhance the economy’s resilience.

Such buffers built up prior to the pandemic had proven very valuable by making it possible to implement aggressive fiscal measures to help support the economy during COVID-19, the council said.