GDP growth led to fiscal surpluses and reduced public debt

The Malta Fiscal Advisory Council's annual report prior to COVID-19

Valletta empty due to coronavirus
Miguela Xuereb

The Malta Fiscal Advisory Council (MFAC) has published its Annual Report for 2019, which was tabled in Parliament on Monday.

In a statement, MFAC Chairman noted that this report was produced before the first cases of COVID-19 were reported in Malta. Nonetheless, the council said it is following the situation closely in preparation for the endorsement process, which will be carried out when the Government updates the country’s official macroeconomic forecasts and fiscal targets.

Regarding the Annual Report for 2019, the council welcomed the fact that the macroeconomic and fiscal forecasts prepared by the Government since the establishment of the Malta Fiscal Advisory Council, in 2015, have always been considered plausible and within the Council’s endorsable range.

It also noted that the GDP growth recorded in recent years has enabled the Government to achieve a stream of fiscal surpluses and a reduction in the public debt-to-GDP ratio.

The Annual Report contains two thematic chapters – a chapter compared the GDP and fiscal developments in Malta over a five-year period to those in the euro area and another chapter focused on the activities of Extra-Budgetary Units in Malta.

In the first chapter, it was explained that the faster economic growth in Malta, when compared to the euro area, contributed to higher tax revenue growth, which in turn financed stronger expenditure growth, while still achieving the target of a fiscal surplus. While in the second chapter it was reported that institutions which are responsible to perform specialised public functions in areas such as education, health, administration, regulation and social policy, have on aggregate recorded a surplus between 2014 and 2018.

The Malta Fiscal Advisory Council has reminded of the importance to continue evaluating closely the implications on the fiscal balance, public debt and contingent liabilities of such current and future arrangements.