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Malta:Draft Budgetary Plan2022

October 2021

GOVERNMENT OF MALTAMINISTRY FOR FINANCEAND EMPLOYMENT

This document is based on statistical information available up to the 29th of September, 2021

The following symbols have been used throughout this document:

. . . to indicate that data are not available;

___ to indicate that the figure is negligible;

0 to indicate that the figure is zero;

- to indicate that data are not applicable or cannot be determined;

n/c to indicate that there is no change in the data.

Figures may not add up due to rounding.

1. Overall Policy Framework and Objectives

3Malta: Draft Budgetary Plan 2022

1. Overall Policy Framework and Objectives As the recovery from the effects of the COVID pandemic gains momentum, the Budget for 2022 is targeting three main objectives:

• First, there is the objective to strengthen further the distributional policies enacted in recent years with the objective of enhancing social inclusion, promote social mobility and reduce poverty. To this effect, various measures are intended to supplement the income of those sections of the population which are more dependent on state support, including the elderly and also children living in low-income households. Various measures have strengthened further pension adequacy, also in recognition of the potential effects of rising inflation on those which have a higher risk of poverty. Other measures are aimed at improving housing affordability whilst social housing projects are due to be finalised.

• Secondly, the Budget also seeks to provide the conditions for the economy to recover from the impact of the COVID-19 pandemic and creating employment within the framework of inclusive economic growth. This Plan is supplemented by the National Employment Policy launched in October 2021, which aims at strengthening the human resource potential with a greater focus on education and training and that seeks to go beyond the generation of employment. The National Employment Policy document seeks to improve employment opportunities for quality jobs consistent with higher standards of living and better quality of life.

• Thirdly, the Budget is also facilitating the Green and Digital transitions. It seeks to emphasise the concept of sustainable economic development and that the greening of the economy becomes more central to future economic prosperity. Within the framework, the Government is providing an additional funding for afforestation as part of the greening of the economy while also encouraging the renovation of traditional Maltese homes through a number of grants and incentives. In this way, existing housing stock can be renovated reducing the necessity of continuing to build in green spaces. Conscious of the contribution of transport to emissions and air quality, the 2022 Budget commits to make public transport free (as from October 2022), and increases incentives for electric vehicles whilst strengthening the infrastructure necessary to achieve these environmental goals.

These are ambitious targets. However, the Government considers the long-term strategy to strengthen economic growth as essential in promoting fiscal sustainability. Having said this, the Government is conscious of the positive bearing that fiscal consolidation and sustainable debt levels have on potential growth and is already embarking on such a process as temporary support measures are replaced with more targeted measures aimed at sustaining the economic recovery and supporting potential output. Over the medium-term, the Government will continue to pursue policies aimed at achieving prudent medium-term fiscal positions with a measure of control on current spending whilst supporting investment in physical and human capital and increasing productivity.

1.1 Macroeconomic Scenario Following the resurgence of infections in early 2021 and the restrictive measures put in place to contain the spread of the virus, economic activity during the first half of 2021 started to show signs of recovery as notable progress was made in vaccinations and containment measures were being gradually eased. The Government support measures proved to be effective at cushioning the impact on the labour market and this helped to mitigate the economic repercussions of the pandemic and support the recovery.

4 Malta: Draft Budgetary Plan 2022

In the first half of 2021, economic activity increased by 5.6 per cent in real terms, or 6.9 per cent in nominal terms. These nominal growth rates stood slightly below the average growth rates of 7.7 per cent and 7.5 per cent recorded in the EU27 and Euro Area (EA), reflecting the lingering effect of the pandemic on tourism which is a hallmark of the Maltese economy. The Maltese economy is expected to maintain the positive momentum in the second half of the year and is expected to grow by 4.8 per cent in real terms during 2021.

In 2022, the recovery is expected to accelerate, and the Maltese economy is projected to grow by 6.5 per cent in real terms, and by 8.6 per cent in nominal terms, implying that the pre-pandemic level of output is expected to be attained by the end of 2022. Domestic demand is anticipated to contribute 4.4 percentage points, driven by strong private consumption and investment. The contribution of net exports to growth is expected to be 2.0 percentage points to growth, as external demand conditions are also expected to improve.

A gradual recovery in the output gap is expected to materialise over the forecast horizon but will remain negative over the time period covered in this Plan. Over the medium-term, potential output growth is projected to average at around 3.5 per cent. Labour is expected to be the main contributor to potential output followed by capital accumulation.

These projections continue to reflect uncertainty. The risk assessment consistent with the analysis of alternative model forecasts indicates upside risks in 2021 growth but downside risks in 2022. In particular, more persistent inflationary pressures at a global level, driven by strengthening demand and supply bottlenecks could create downside risks to the 2022 projections. In particular, Government is closely monitoring inflationary developments, particularly the rising energy prices. The uncertainties on energy prices have been taken into consideration in the Budget statement. This downside risk could be exacerbated by a slower and weaker than expected recovery in tourism. At the same time, the outlook could improve if various investment projects not included in the baseline projections materialise.

1.2 Fiscal Policy Objectives The economic situation, though much improved when compared to last year, is still substantially below potential and characterised by a high level of uncertainty. Thus, while most of the fiscal support measures supporting the economy during the Pandemic will expire as planned, the budget is still expected to remain in deficit territory. This reflects the lingering effects of the pandemic on economic activity which remains substantially below its potential. Also, the recovery in tourism, one of the hallmarks of the Maltese economy will be more gradual than in other sectors. In addition, the Budget for 2022 contains measures which will support further the economic recovery, particularly an increase in public investment. As a result, the budget deficit is expected to fall significantly, from 11.1 per cent in 2021 to 5.6 per cent in 2022. The structural deficit is expected to improve by 4.1 percentage points to reach 4.5 per cent of potential Gross Domestic Product (GDP) in 2022. Based on current projections, the deficit is targeted to fall below 3 per cent of GDP by 2024, in line with the most recent targets submitted to Parliament in the Medium-Term Fiscal Plan. This is, on average, consistent with a half percentage point structural adjustment. As a result, the debt ratio will rise only modestly from 61.3 per cent of GDP in 2021 to 61.8 per cent of GDP in 2022, supported by a buoyant economic recovery. Over the medium-term, the debt ratio is expected to increase further in 2023 but will fall thereafter to 62.4 per cent in 2024, thus converging to the 60 per cent threshold.


1.3 Endorsement by the Malta Fiscal Advisory CouncilThe targets contained in this Plan fulfil the legal requirements established by virtue of the Fiscal Responsibility Act. In addition, the macroeconomic forecasts underlying this Plan has been endorsed by the Malta Fiscal Advisory Council.

2. Economic Outlook


2. Economic Outlook

2.1 The Short-Term ScenarioThe COVID-19 pandemic had a profound effect on the Maltese economy, in part owing to its exposure to tourism and the contact-intensive services sectors. This consequently led to an unprecedented drop in output during 2020.

In the first half of 2021, the economy started to show signs of recovery as notable progress was made in vaccination roll-outs and the containment measures were being gradually eased. The Government support measures proved to be effective at cushioning the impact in the labour market in 2020 and this helped to mitigate the economic disruptions being caused by the pandemic. While significant progress in vaccine inoculation in Malta and abroad has been made, and uncertainty related to the pandemic seems to be gradually subsiding, the economic outlook remains overshadowed with risks.

In the first half of 2021, economic activity increased by 5.6 per cent in real terms and 6.9 per cent in nominal terms. These nominal growth rates were slightly below the average growth rates of 7.7 per cent and 7.5 per cent recorded in the EU27 and Euro Area (EA), reflecting the lingering effect of the pandemic on tourism which is one of the major pillars of the Maltese economy.

The growth in the first half of 2021 was primarily driven by the domestic side of the economy, with increases in both private and public consumption, and Gross Fixed Capital Formation (GFCF). Private consumption expenditure registered an increase of 3.9 per cent, reflecting the gradual easing of restrictions in the second quarter of 2021 and the impact of pent-up consumer demand. GFCF recorded a growth rate of 7.1 per cent, as improving financing conditions and lower uncertainty relative to the previous year encouraged investment. The Government continued to support the recovery, as public consumption grew by 9.1 per cent. This increase also reflects additional healthcare expenditure undertaken to combat the virus. From an external standpoint, in the first half of 2021, Malta recorded a neutral contribution from net exports of goods and services. In the first six months of the year, imports increased by 3.3 per cent, which outweighed the 3.0 per cent increase in exports which continued to be weighed down by lower tourist inflows in the first few months of the year.

During the first half of 2021, Gross Value Added (GVA) in nominal terms registered a growth of 6.3 per cent over the same period in 2020. This growth was predominantly driven by the recovery in the Services sector, which contributed 5.5 percentage points to GVA growth, and to a lesser extent by the Industrial sector, which contributed 0.8 percentage points. The only sector that contracted during the first half of 2021 was the Wholesale and Retail Trade, Accommodation and Food services sector, declining by 2.0 per cent, as restrictions were re-introduced to contain the spread of the virus. During the second quarter of 2021, the sector recorded a 25.2 per cent growth rate, as the alleviation of restrictive measures released pent-up demand which was further supported by the Government vouchers scheme. The Arts, Entertainment and Recreation sector recorded the most growth in GVA, increasing by 16.4 per cent, followed by Mining, Quarrying, Electricity and Water (15.6 per cent), the Public Administration, Education and Human Health sector (11.7 per cent), the Information and Communication sector (7.7 per cent), Manufacturing (6.4 per cent) and Financial and Insurance activities (6.2 per cent). The sectors that contributed the most to GVA growth were the Public Administration, Education and Human Health sector, and the Arts, Entertainment and Recreation sector, at 2.1 and 1.5 percentage points respectively.


The factor distribution of income gains throughout the first half of 2021 was more balanced when compared to the previous year, albeit the increase in profits was slightly more than the increase in compensation of employees. Corporate profits and mixed income, increased by €221.8 million, while the compensation of employees increased by €168.7 million in the first half of 2021. The growth in compensation of employees was broad based, with notable growth in the Public Administration, Education and Human Health sector (9.7 per cent) and the Arts, Entertainment and Recreation sector (7.7 per cent), together with the Construction sector (7.5 per cent). The Maltese economy is expected to maintain the positive momentum in the second half of this year, also owing to stronger base effects from a weaker end of the year in 2020 and a modest recovery in global demand. The economy is expected to grow by 4.8 per cent in real terms during 2021. Domestic demand is expected to be the main driver of economic growth, contributing 5.1 percentage points to growth. Net exports are expected to produce a drag of 0.5 percentage points on real Gross Domestic Product (GDP) growth, weighed down by weak tourism developments during the first few months of the year. Furthermore, the contribution of inventories is expected to be 0.3 percentage points.

Private consumption is projected to partially recover by 4.3 per cent. Base effects resulting from the supply restrictions imposed in 2020 combined with strong labour market performance and income growth are expected to drive the recovery in private consumption. Consumer sentiment indicators and mobility data suggest that in the third quarter of 2021, the recovery in consumption was maintained, assisted by Government support. Public consumption is expected to grow by 9.6 per cent, driven predominantly by intermediate consumption and compensation of employees. It is worth mentioning that the inherently volatile nature of GFCF makes it relatively challenging to forecast. However, as the economy recovers and uncertainty relative to the pandemic dissipates, investment is expected to rebound. GFCF is projected to increase by 5.0 per cent in 2021. Following a worldwide recession in 2020, global economic growth is expected to continue recovering in 2021 as further improvements in the epidemiological situation are registered and economic activity gains momentum. External assumptions on growth in Malta’s main trading partners improved since the Spring forecast, while the Euro is expected to appreciate at a slower pace than that anticipated in April. This resulted in more optimistic outlook of the external performance of some sectors, particularly the Remote Gaming sector, the Chemical and Pharmaceuticals sector and the Information and Communication sector. Consequently, exports are expected to increase by 5.2 per cent in 2021.

Imports are expected to grow by 5.9 per cent in 2021. Investment activity in Malta is highly import-intensive. In fact, underlying this growth in imports is a pick-up in investment, along with higher domestic consumption growth.

In 2022, the Maltese economy is projected to grow by 6.5 per cent in real terms, and by 8.6 per cent in nominal terms, implying that the pre-pandemic level of output is expected to be attained by the end of 2022. Domestic demand is anticipated to contribute 4.4 percentage points, driven by strong private consumption and investment. The contribution of net exports to growth is expected to be 2.0 percentage points to growth.

In 2022, consumption is expected to grow more moderately by 4.0 per cent, as base effects from the recovery in pent up demand experienced during 2021 starts to dissipate. Public consumption is projected to grow by 2.7 per cent following a low base in the prior


year. In 2022, investment is expected to accelerate to 8.8 per cent, as several large-scale investment projects in transport and aviation, tourism, real estate, healthcare, education, and digital sectors are expected to materialise.

From an external perspective, a continued strong recovery in Malta’s main trading partners, and a further easing in travel restrictions in Malta and abroad, is anticipated to result in an increase in exports by 6.6 per cent. The improved prospects for domestic demand, coupled with an increase in investment activity, and the growth in external demand are projected to generate growth in imports of 5.5 per cent in 2022.

Table 2.1 presents the main macroeconomic indicators for the period 2018 to 2022. The figures for the period 2018 to 2020 are based on the latest data released by the National Statistics Office (NSO) under the European System of National and Regional Accounts (ESA 2010), whereas the figures presented for 2021 and 2022 are projections produced by economists within the Ministry for Finance and Employment (MFE).

Main Macroeconomic IndicatorsTable 2.1

2018 2019 2020 2021p 2022p

GDP growth at current market prices (%) 8.5 8.2 -7.1 7.0 8.6GDP growth at Chain Linked Volumes by period (Reference year 2010) (%)(1) 6.1 5.7 -8.3 4.8 6.5

Expenditure Components of GDP at Current Market Prices by period (%) Private final consumption expenditure(2) 9.7 6.6 -8.9 5.7 5.7 General Government final consumption expenditure 15.3 16.9 17.2 12.6 5.3 Gross fixed capital formation 5.7 9.3 -5.7 6.3 10.2 Exports of goods and services 2.1 7.8 -5.9 7.4 8.9 Imports of goods and services 1.9 8.4 -2.4 7.9 7.5

Expenditure Components of GDP at Chain Linked Volumes by period (Reference year 2010) (%) Private final consumption expenditure(2) 8.8 4.6 -10.0 4.3 4.0 General Government final consumption expenditure 12.4 14.2 15.1 9.6 2.7 Gross fixed capital formation 4.7 8.2 -6.5 5.0 8.8 Exports of goods and services -0.1 5.8 -6.3 5.2 6.6 Imports of goods and services 0.4 6.8 -2.7 5.9 5.5

Inflation rate (%) 1.7 1.5 0.8 0.7 1.7Employment growth (Headcount) (3) (%) 6.0 5.7 2.7 2.3 2.2Unemployment rate (Harmonised definition, Eurostat) (%) 3.7 3.6 4.3 3.8 4.0Compensation per employee (% change) 3.6 3.6 -0.3 3.9 2.1Labour productivity (% change) 0.1 0.0 -10.7 2.3 4.2Nominal Unit Labour Cost (% change) 3.5 3.5 11.7 1.6 -2.0Real Unit Labour Costs (% change) 1.1 1.0 10.4 -0.6 -4.0

(1) Users should note that chain-linking gives rise to components of GDP not adding up to the aggregate real GDP series. This non-additivity, similar to that in other countries’ national accounts, is due to mathematical reasons and reflects the fact that chain-linked volumes are calculated by separately extrapolating both totals and their sub-components.

(2) Includes NPISH final consumption expenditure.

(3) The forecast of employment growth is based on national accounts definition


2.1.1 Assumptions for ProjectionsThe macroeconomic forecasts presented in this Draft Budgetary Plan are based on the following assumptions:

1. Economic activity in Malta’s main trading partners is expected to partially recover by 4.7 per cent in 2021, then to further increase by 4.3 per cent in 2022.

2. Oil prices are expected to increase, reaching an average of US $68.3 per barrel in 2021 and US $67.5 in 2022.

3. The short-term interest rate is expected to remain at the current spot rate of 0.0 per cent in both 2021 and 2022. On the other hand, the long-term interest rate is expected to average at 0.5 per cent during the forecast horizon.

4. The USD/EUR exchange rate is expected to average 1.1832 in 2021 and 1.1910 in 2022, representing an appreciation of the Euro of 2.6 per cent and 0.7 per cent in 2021 and 2022 respectively. The STG/EUR exchange rate is expected to average 0.8535 in 2021 and 0.8507 in 2022, representing a depreciation of the Euro of 5.4 per cent and of 0.3 per cent in 2021 and 2022 respectively.

5. It is assumed that, starting from the third quarter of 2021, changes in inventories will not contribute materially to GDP growth.

6. World prices, weighted by Malta’s main trading partners, are assumed to increase by 5.6 per cent in 2021 and by 2.9 per cent in 2022.

7. In 2021, inbound tourism is expected to follow a monthly trend increase and reach 31.0 per cent of 2019 levels for the whole year, before reaching 75.0 per cent in 2022.

2.1.2 Employment ProspectsThe Labour Force Survey (LFS) reported an employment rate of 74.4 per cent in the second quarter of 2021, which was 1.7 percentage points higher than the corresponding period last year. In the first half of 2021, employment growth stood at 1.4 per cent. However, due to low base effects in the second half of 2020, and a general pick-up in domestic activity, employment is expected to grow at a faster pace in the second half of the year. To this end, employment is projected to increase by 2.3 per cent in 2021 with the unemployment rate falling to 3.8 per cent. In 2022, as firms face labour supply bottlenecks and the Government measures supporting the labour market are gradually withdrawn, employment is expected to grow by 2.2 per cent, while the unemployment rate is anticipated to increase slightly to 4.0 per cent while still standing well-below the European Union (EU) average.

2.1.3 InflationThe Harmonised Index of Consumer Prices (HICP) inflation rate (12-month moving average) decelerated to 0.3 per cent in the first half of 2021, while the 12-month moving average Retail Price Index (RPI) increased by 0.6 per cent. The low HICP figure is a result of the revision in HICP weights to reflect changing consumer spending at the beginning of the year, as well as decreases in fuel prices announced in 2020 to support the economic recovery from the pandemic. The consumption basket of domestic consumers tends to be heavily weighted towards recreational activities such as Restaurants and Hotels, Recreation and Culture, and Transport. Consumers’ inability to spend on these activities during the pandemic was reflected in the weights of the HICP. Besides, the weighting mechanism of HICP also takes into consideration tourist expenditure in Malta, which is another notable component of consumer spending. As a result, while inflation is expected to reach 0.7 per cent this year, prices are expected to accelerate to 1.7 per cent in 2022 as spending patterns revert to pre-COVID patterns and supply side bottlenecks persist as rising foreign prices feed into domestic prices.


2.1.4 Sectoral BalancesAppendix Table 1.d provides an overview of the current account forecast up till 2022. A lower current account deficit equivalent to 3.7 per cent of GDP is expected in 2021 when compared to 2020 due to a higher net export balance on goods and services. Meanwhile, a stronger positive goods and services balance is expected in 2022 in line with a continued strong recovery in Malta’s main trading partners. This development is expected to lead to a current account surplus equal to 0.3 per cent of GDP in that year, despite the expected increase in net payments on the income account.

2.2 Comparison to Commission’s Latest ForecastPrior to comparing the MFE’s Autumn forecasts with those published by the European Commission (EC) in Summer, it is worth mentioning that the EC’s forecast does not include the latest national accounts data published by the NSO, while the MFE’s forecasts are based on this data. Furthermore, MFE’s forecasts incorporate the latest data and forecasts in the external environment which are important for a small and open economy.

The Spring forecast published by the EC projected Malta’s GDP growth to stand at 4.6 per cent for 2021 and at 6.1 per cent in 2022. The EC expected domestic demand to be the main driver of the recovery in both forecasted years. In the interim Summer forecast, the EC suggests a stronger recovery in 2021, with GDP increasing by 5.6 per cent, when compared to MFE’s projection of 4.8 per cent, which forecasts a more gradual recovery. In 2022, EC projects GDP to grow by 5.8 per cent, while MFE expects GDP growth to stand at 6.5 per cent. This means that MFE’s forecast is 0.8 percentage points lower in 2021, and 0.7 percentage points higher in 2022.

2.3 Potential Output and the Output GapThe estimation of potential output and the output gap is based on the commonly agreed Production Function methodology. Any differences between the EC’s and MFE’s estimation pertain to differences in the macroeconomic forecasts.

Recent potential output and output gap developments as well as projections are depicted in Chart 2.1. Average potential output growth stood at 5.0 per cent from 2011 to 2019. In 2020, potential output growth fell to 2.8 per cent, as the Maltese economy experienced a strong contraction owing to the COVID-19 pandemic. Naturally, the output gap turned negative reaching 6.5 per cent of potential output in 2020. A gradual recovery in the output gap is expected to materialise over the forecast horizon but will remain negative over the forecast covered in this Plan.

Over 2021 and 2022, potential output growth is projected to average at around 3.5 per cent. Labour is expected to be the main contributor to potential output followed by capital accumulation, while total factor productivity is expected to negatively contribute to potential output.

2.4 Comparison with the MFE Spring ForecastsThe economic outlook in this Draft Budgetary Plan has been revised upwards for 2021, following a stronger than anticipated first half of the year, reflecting a surge in domestic demand following the gradual alleviation of containment measures, and an improved external outlook.


The contribution from the external side of the economy was revised marginally upwards for 2021, reflecting a recovery in Malta’s main trading partners and a slower anticipated appreciation of the Euro. However, the revision in the external side is affected by the assumption of higher world prices in 2021, owing to an increase in shipping costs and commodity prices, reflecting an upward revision in exports and imports in nominal terms. The contribution from domestic demand has also been revised marginally upwards, as household consumption is expected to rebound more strongly than anticipated in Spring. Growth in 2022 has been revised marginally downwards from MFE’s Spring forecasts, in view of a higher expected contribution from net exports and a larger downward revision in domestic demand. This revision, however, is driven mostly by base effects from the stronger recovery now expected in 2021. The outlook for 2022 is indeed still positive.

2.5 Sensitivity AnalysisThe macroeconomic forecast is the economic foundation of the Government’s fiscal policy targets presented in this Plan. In this context, the macroeconomic forecasts balance the need to strive for forecast accuracy with the need to maintain a measure of prudence. This is complemented by the assessment of past forecasting performance and a rigorous and scientific quantification of macroeconomic risk, based on research carried out by the Economic Policy Department (EPD) within the MFE. While the Maltese economy has proved to be very resilient to the international economic crisis, GDP forecast errors are relatively higher for Malta than those observed for larger and less open economies within the EU1. This section provides an assessment of forecast uncertainty and the balance of risk surrounding the macroeconomic forecasts in this Programme. The analysis is in line with the requirements of Council Directive 2011/85/EU of the EU on the requirements for budgetary frameworks of the Member States.

2.5.1 The Accuracy of Past Forecasting PerformanceThe updated analysis shows a tendency to underestimate GDP growth and hence a downward bias in the GDP growth projections in previous years. However, this is

Chart 2.1

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2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021f 2022f

Malta's Potential Output Growth and Output Gap Estimates

Output Gaps (% of Potential Output) Potential Growth (annual % change)

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primarily a result of significant statistical revisions in the national accounts data. While the one-year ahead forecasts display a root-mean squared error (RMSE) of 3.8, it is notable that the sample size employed is rather small and the earliest available forecast is that of 2004. Given the small sample size, the recession of 2009 and 2020 and, the subsequent recoveries, statistical revisions play an undue influence on this evaluation and limit comparability with the forecast accuracy displayed by other economies with a longer forecast tradition. It is noteworthy that over successive vintages of forecasts, the RMSE has widened, primarily reflecting the relatively large forecast errors in 2014, 2015 and 2017 which are symptomatic of significant upward revisions in the national accounts data.

The evaluation of the risk and uncertainty surrounding the current macroeconomic projections underpinning this Programme is based on both an ex-ante analysis of past forecast errors which determine the level of uncertainty and an ex-post assessment of the balance of risk based on several alternative but plausible economic scenarios generated with the forecasting model used by the EPD.

2.5.2 The Balance of RisksTo determine the balance of risks surrounding the macroeconomic forecasts, six alternative model-based growth projections were carried out as follows:

1. Improved global economic growth based on the upper bound of the Consensus forecasts.

2. Weaker global economic growth based on the lower bound of the Consensus forecasts.

3. Higher interest rate scenario, assuming that the recovery is stronger, inflationary pressures are more persistent and the European Central Bank (ECB) starts tapering their asset purchases, which should result in a reluctance of investors to hold fixed income assets, lowering asset prices and raising yields.

4. Higher investment scenario, which assumes that investor certainty is restored in the beginning of 2022 and that projects which were originally planned for 2022 are not delayed.

5. Higher energy and world prices scenario, which assumes that the prevalent increase in energy prices is non-transitory and continues to be driven by surging global demand ensuing from the economic recovery, supply disruptions and investor speculation. Persistent supply bottlenecks in other areas, particularly in transport and semi-conductors, combined with domestic labour market shortages are also assumed to manifest into higher world prices.

6. Less optimistic tourism scenario, which assumes a more conservative tourism projection for the second half of the year. In 2022, the tourism recovery is also assumed to be more muted.

These represent scenarios that are plausible alternatives to the baseline projections. While economic judgement influences the choice of these scenarios, this judgement is also underpinned by the constant monitoring of economic conditions prevailing at the time as well as the various meetings with economic stakeholders and regulators operating within the Maltese economy, carried out in the early stages of the forecasting exercise.

Among the alternative forecasts, a more detailed description is provided for the alternative growth and interest rate scenarios as required by the Directive.

2.5.2.1 Improved Global Economic GrowthIn this scenario, the growth rates of Malta’s key trading partners are assumed to be higher than originally anticipated in the baseline scenario, where the global growth


rate is increased by 0.7 percentage points in 2021, and by 1.0 percentage point in 2022. The relatively higher than expected economic growth in Germany, France, Italy, the UK, and the US, is based on the Consensus Forecasts September 2021, assuming the most optimistic growth figure for each trading partner for the forecast years 2021 and 2022. The outcome of this scenario is a 0.2 percentage point upward revision in real GDP for both 2021 and 2022. In this risk scenario, the budget balance would be relatively unaffected in both forecast years.

2.5.2.2 Weaker Global Economic GrowthThis scenario models the downside risk of a lower assumption than the baseline forecast for Malta’s main trading partners. The relatively lower than assumed economic growth rate in Germany, France, Italy, the UK, and the US is based on the Consensus Forecasts September 2021, assuming the lowest growth figure for each trading partner for the forecast years 2021 and 2022. In this scenario, global growth, weighted by Malta’s main trading partners, declines by 0.9 percentage points in 2021 and by 1.1 percentage points in 2022. The outcome of this scenario is that the Maltese economy would decline by 0.1 percentage points and by 0.3 percentage points from the baseline in 2021 and 2022 respectively. The budget balance would be marginally lower by 0.1 percentage points in both 2021 and 2022, when compared to the baseline forecast.

2.5.2.3 Interest Rate ScenarioThis scenario assumes that long-term interest rates are assumed to increase by 50.0 basis points in the third quarter of 2021, thereby steepening the yield curve compared to the baseline scenario. This scenario attempts to reflect the tapering of monetary policy and a reluctance of investors to hold fixed income assets. The effect of this scenario would be lower real investment growth leading to a decline of 0.3 percentage points in real GDP in 2022. The budget balance will deteriorate by 0.1 percentage points in 2022.

2.5.3 Alternative Model ForecastsMoreover, the EPD has developed six alternative forecasting models ranging from model-free statistical forecast (Random Walk and Holt-Winters Seasonal Smoothing Method), model-based univariate forecasts (1 ARIMA model) and model-based multivariate forecasts (3 VAR models). These models help EPD benchmark the results inferred from STEMM and can be used to generate alternative growth forecasts. For 2021, the average of all models suggested GDP is set to increase by approximately 4.5 per cent, while the average of VAR models produced an estimate of 5.4 per cent. For 2022, the average of all models suggests a growth rate of 4.1 per cent while the VAR model average indicates GDP growth of 5.8 per cent.

2.5.4 Uncertainty and the Balance of Risk Underlying theMacroeconomic Projections

The uncertainty surrounding the macroeconomic projections is based on the past forecast error variance of GDP. This is equal to 2.8 for the current year forecast, and 2.9 for the one-year ahead forecast. The balance of risk is based on the Pearson skewness indicator of the model generating alternative forecast for GDP documented above. The indicator shows a mild upside risk for 2021, but a marginal downside risk for 2022. The result is consistent with the analysis of alternative model forecasts highlighted earlier. Chart 2.2 represents the uncertainty and the balance of risk surrounding the macroeconomic forecasts presented in this Draft Budgetary Plan.


2.5.5 Risks to Fiscal TargetsThe alternative macroeconomic scenarios documented above, can influence the attainment of the general Government fiscal targets, thus underpinning alternative fiscal conditions. Chart 2.3 illustrates the range of possible budget balance outcomes conditional upon the realisation of these alternative scenarios. This year, the evaluation of fiscal risk conditional on macroeconomic risks also incorporates the variance resulting from the past forecast error of fiscal projections, based on a methodology similar to that used for deriving the macroeconomic risk assessment. As a result, the risk assessment is presented in the form of a probabilistic Fan Chart rather than point estimates. The

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Fan Chart with GDP Growth Forecasts

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Fan Chart with Budgetary Targets

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Chart 2.4

budget balance risk is skewed towards the downside in 2021 and neutral in 2022. Looking at point estimates, under all sensitivity scenarios conducted, the budget deficit should improve considerably by 2022, with the worst-case scenario suggesting a maximum 0.2 percentage point drop from the baseline.

2.5.6 Alternative Output Gap projections and risks to StructuralFiscal Targets

This assessment has been extended to cover risks to the output gap projections and hence the structural commitments presented in this Programme. Accordingly, alternative output gap projections consistent with the above economic scenarios have been carried out.

Compared to the baseline scenario, as shown in Chart 2.4, alternative output gap projections range from -5.1 per cent of potential output up to -4.8 per cent in 2021 and from -3.6 per cent of potential output up to -2.3 per cent in 2022.

Footnote:

1 Camilleri, G., and Vella, K. (2015). “Interpolating Forecast Errors for Assessing Uncertainty in Macroeconomic Forecasts: An Analysis for Malta.” EPD Working Paper Series, No. 1/2015, March 2015. http://mfin.gov.mt/en/epd/Documents/Working_Papers/Working_Paper_Full.pdf

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Output gap: Risk assessment

lower bound baseline upper bound


Macroeconomic forecasts(Basic assumptions)

Appendix Table 0.i

Data Source 2020 2021p 2022p

Short-term interest rate (annual average) ECB 0.0 0.0 0.0Long-term interest rate (annual average) ECB 0.5 0.5 0.5

USD/€ exchange rate (annual average) ECB + Consensus Economics (September 2021) 1.153 1.183 1.191

STG/€ exchange rate (annual average) ECB + Consensus Economics (September 2021) 0.903 0.854 0.851

Real GDP Growth of main trading partners Eurostat + Consensus Economics (September 2021) -6.3 4.7 4.3

Nominal GDP Growth of main trading partners Eurostat + Consensus Economics (September 2021) -5.0 6.8 6.0

Oil prices (Brent, USD/barrel)US Energy Information Administration (EIA) + Consensus Economics (September 2021)

41.80 68.30 67.50


Macroeconomic forecasts(Macroeconomic prospects)

Appendix Table 1.a

€ million CLV 2010 Prices

rate of change

ESA Code 2020 2020 2021p 2022p

1. Real GDP(1) B1*g 11,849.8 -8.3 4.8 6.52. Potential GDP 2.8 3.3 3.6

contributions: - labour 2.5 2.5 2.3- capital 1.5 1.5 1.7- total factor productivity -1.2 -0.7 -0.3

3. Nominal GDP B1*g 13,054.9 -7.1 7.0 8.6

Components of real GDP4. Private final consumption expenditure(2) P.3 5,438.2 -10.0 4.3 4.0

5. Government final consumption expenditure P.3 2,456.6 15.1 9.6 2.7

6. Gross fixed capital formation P.51 2,710.5 -6.5 5.0 8.8

7. Changes in inventories and net acquisition of valuables (% of GDP) P.52 + P.53 1.5 1.7 1.6

8. Exports of goods and services P.6 17,229.7 -6.3 5.2 6.69. Imports of goods and services P.7 16,182.3 -2.7 5.9 5.5

Contributions to real GDP growth10. Final domestic demand 10,605.3 -3.4 5.1 4.411. Changes in inventories and net acquisition of valuables P.52 + P.53 197.1 0.6 0.3 0.0

12. External demand B.11 1,047.5 -5.5 -0.5 2.1

(1) Users should note that chain-linking gives rise to components of GDP not adding up to the aggregate real GDP series. This non-additivity, similar to that in other countries’ national accounts, is due to mathematical reasons and reflects the fact that chain-linked volumes are calculated by separately extrapolating both totals and their sub-components.

(2) Includes NPISH final consumption expenditure.


Macroeconomic forecasts(Price developments)

Appendix Table 1.b

Index(1) rate of change

ESA Code 2020 2020 2021p 2022p

1. GDP deflator 124.1 1.2 2.2 2.12. Private consumption deflator 115.4 1.1 1.2 1.63. HICP 106.4 0.8 0.7 1.74. Public consumption deflator 124.5 2.1 2.7 2.55. Investment deflator 113.5 0.8 1.3 1.2

6. Export price deflator (goods and services) 121.4 0.4 2.1 2.1

7. Import price deflator (goods and services) 116.2 0.3 1.8 1.9

(1) Index (base 2010 unless otherwise indicated)

Macroeconomic forecasts(Labour market developments)

Appendix Table 1.c

€000s rate of change

ESA Code 2020 2020 2021f 2022f

1. Employment, persons1 259.0 2.7 2.3 2.22. Employment, hours worked2 478,123.1 2.7 2.3 2.23. Unemployment rate (%)3 4.3 3.8 4.0 4. Labour productivity, persons4 45.8 -10.7 2.3 4.2 5. Labour productivity, hours worked 5 -10.7 2.3 4.2 6. Compensation of employees D.1 6,089.5 2.1 6.4 4.37. Compensation per employee 27.0 -0.3 3.9 2.1

1 Forecasts based on national accounts definition2 Forecasts based on national accounts definition.3 Harmonised definition, Eurostat; levels.4 Real GDP per person employed (Forecasts based on national accounts definition)5 Real GDP per hour worked (Forecasts based on national accounts definition)


Macroeconomic forecasts(Sectoral balances)

Appendix Table 1.d % GDP

Percentages of GDP ESA Code 2020 2021 2022

1. Net lending/ borrowing -3.4 -3.1 1.0vis-à-vis the rest of the world B.9of which:Balance on goods and services 6.8 7.3 12.8Balance of primary incomes and transfers -10.8 -11.0 -12.5Capital account 0.6 0.6 0.7

2. Net lending/ borrowing of the private sector B.9 5.0 6.4 5.23. Net lending/ borrowing of general Government EDP B.9 -9.7 -11.1 -5.64. Statistical discrepancy 1.4 1.5 1.4

Current Account -4.0 -3.7 0.3

3. General Government Budgetary Developments


3. General Government Budgetary DevelopmentsMalta’s public finance sustainability has continued to improve in recent years, backed by a prudent approach to fiscal policy, strong economic growth, and favourable financing conditions. Against the background of the unprecedented and extraordinary circumstances surrounding the COVID-19 situation, backed by a solid financial position, the Maltese Government immediately launched a series of financial packages to address the health emergency needs, ease liquidity pressures on businesses while seeking to protect jobs and household incomes. Discretionary policies have complemented the full operation of automatic fiscal stabilisers, as a result of which the general Government balance turned negative. The severe economic situation and the large fiscal policy response resulted in a budget deficit of close to 10 per cent of Gross Domestic Product (GDP) in 2020, while the general Government debt increased by almost 13 percentage points to 53.4 per cent of GDP. It is important to note, that although the fiscal support measures in Malta were among the strongest in the European Union (EU), such that the deficit recorded in 2020 was one of the highest in the EU, the impact on the debt ratio has been lower than for other Member States. In spite of the resurgence of infections early in 2021, which required renewed restrictions in an attempt to control the virus, the rapid rollout of effective vaccines allowed the easing of public health restrictions and permitted a rebound in consumption and output through this year, partially supported by the release of extra savings built up by households during the pandemic. As the positive momentum in the Maltese economy is expected to be sustained in the second half of the year and the pre-pandemic levels of output are expected to be met by the end of 2022, the 2022 Budget builds on this recovery and seeks to ensure that the path of economic growth witnessed in recent years is sustained into the near future, whilst ensuring that economic growth translates into a higher quality of life for all citizens. Indeed, the Budget for 2022 aims to strengthen further the distributional policies enacted in recent years with the objective of continuing to improve further policies directed at social inclusion, promote social mobility and reduce poverty. In addition, the Budget continues to provide the conditions for the economy to recover from the impact of COVID-19 and also facilitate the twin Green and Digital transitions.

With a view to sustaining the recovery, the Maltese Government is set to maintain a supportive budgetary policy in 2022, allowing for the impact of the Recovery and Resilience Facility to fund additional high-quality investment projects and structural reforms. The assumed economic recovery is expected to boost taxation receipts over the course of the next year and by end of 2022, tax revenue is estimated to exceed the level that was recorded prior to the pandemic. The general Government expenditure is estimated to decline in 2022, as the temporary support is expected to be phased out, in line with the Government’s commitment to contain expenditure as the public health situation improves and the economy recovers. As a result, the Government deficit is projected to stand at 5.6 per cent in 2022 while the debt-to-GDP ratio is expected to reach 61.8 per cent.

This Chapter provides an analysis of planned developments in revenue, expenditure and debt during 2022, including details of the main discretionary measures underpinning the expenditure and revenue targets for 2022, and is based on the European System of Accounts (ESA 2010) methodology. Indeed, data provided in this Chapter covers the general Government sector, which is composed of the central and local Government subsectors. In turn, the central Government subsector comprises the operations of Government Ministries and Departments and of Extra Budgetary Units (EBUs). Appendix Table 6.b provides a list of established EBUs as of 31 December 2020.


3.1 Budgetary targetsThe final outcome in 2020, the evaluation of the general Government budgetary developments during the current year, as well as the revised macroeconomic projections, constitute the basis for the revised projections. Additional revisions also reflect the extension of some pandemic-related fiscal policy measures beyond their original deadline, and other additional measures for the current year, as well as the fiscal impact of the measures underlying the 2022 Draft Budget.

As of 2021, the general Government gross debt is expected to increase by 7.9 percentage points to 61.3 per cent reflecting the impact of the COVID-19 pandemic. The debt-to-GDP ratio is expected to increase by a further 0.5 percentage points in 2022 to reach 61.8 per cent, such that in both years the ratio is expected to surpass the Stability and Growth Pact’s 60 per cent threshold. Developments in gross Government debt and the contributors to developments in the debt-to GDP ratio are presented in Table 2.b. The expected increase in the debt-to-GDP ratio in 2021 is mainly on the back of the negative primary balance together with an expansionary contribution stemming from the stock-flow adjustment (SFA) which is mainly due to the contribution to the Malta Government Stock sinking fund. The recovery in the economy and the low interest rate environment will help to contain a further growth in the debt-to-GDP ratio in 2022.

3.1.1 Updated budgetary plans for 2021During 2021, the general Government deficit was revised upwards by €753 million, compared to the estimated deficit of €792.5 million outlined in the 2021 Draft Budget Plan. These developments mainly reflected higher than anticipated expenditure outlays and, to a lesser extent, lower than anticipated revenue

The revenue variance reflects a more subdued than anticipated revenue outcome in 2020 (-€22 million), a more subdued macro-economic developments in 2021 (-€56 million), lower revenues estimated from the expected behavioural responses in respect to the relative tax bases, as well as the revised fiscal impact of fiscal policy measures (-€65 million). The principal revision in the general Government revenue compared to the estimates outlined in the 2021 Draft Budget Plan relates to taxes on production and

Budgetary TargetsGeneral Government debt developments

Table 2.b % GDP

2020 2021 2022 2023 2024

1. Gross debt 1 53.4 61.3 61.8 62.7 62.42. Change in gross debt ratio 12.7 7.9 0.5 0.9 -0.4Contributions to changes in gross debt

3. Primary balance 8.4 9.9 4.5 3.3 1.84. Interest expenditure 1.3 1.1 1.1 1.1 1.15. Stock-flow adjustment -0.1 0.3 -0.3 0.3 0.4

p.m.: Implicit interest rate on debt 2 3.0 2.3 1.9 1.9 1.9

1 As defined in Regulation 479/2009.2 Proxied by interest expenditure divided by the debt level of the previous year.


imports (-€158 million), in particular revenue from Value Added Tax (VAT) (-€83 million), due to more subdued estimated macro-economic developments in 2021. Other less significant revisions to revenue components included a €16 million downward revision to revenue from taxes on income in 2021 reflecting the legacy of a lower outturn in 2020 when compared to the levels estimated in Autumn 2020.

Meanwhile, higher than targeted expenditure compared to the estimates outlined in the 2021 Draft Budget Plan of €609 million is mainly attributable to subsidies, intermediate consumption, and compensation of employees. Higher than estimated expenses primarily relate to outlays on the COVID-19 Business Assistance Programme, the financial assistance to the national airline, and added outlays towards the health sector

General Government Budgetary Execution and ProspectsTable 3.1 € millions

ESA Code

2021 2022

USP 2020-2021 DBP 2021 DBP 2022 USP 2021-

2024 DBP 2022

Forecast Forecast Forecast Forecast Forecast

Net lending (+)/net borrowing (-)1. General Government S.13 -485.6 -792.5 -1,545.0 -826.1 -850.72. Central Government S.1311 -484.4 -791.3 -1,543.8 -824.9 -849.53. State Government S.1312 - - - - -4. Local Government S.1313 -1.2 -1.2 -1.2 -1.2 -1.25. Social Security funds S.1314 - - - - -

For the General Government

6. Total Revenue TR 5,237.9 5,201.5 5,057.7 5,422.3 5,611.3Of which

Taxes on Production and Imports D.2 1,592.1 1,663.3 1,505.0 1,689.5 1,862.3

Current Taxes on Income, Wealth, etc. D.5 1,928.6 1,857.5 1,841.3 1,920.2 1,995.5

Capital Taxes D.91 19.0 24.4 18.6 25.6 25.8Social Contributions D.61 828.4 819.4 866.7 912.5 912.2Property Income D.4 64.5 82.9 80.2 84.3 71.0Other (a) 805.3 754.0 745.9 790.3 744.5

7. Total Expenditure TE 5,723.6 5,994.0 6,602.7 6,248.4 6,462.0Of which

Compensation of employees D.1 1,619.3 1,667.7 1,766.4 1,782.0 1,855.7Intermediate Consumption P.2 1,220.8 1,220.8 1,338.9 1,265.2 1,421.6Social Payments D.6 1,386.8 1,387.6 1,434.3 1,448.7 1,521.3Interest Expenditure D.41 186.9 157.0 160.2 163.4 166.1Subsidies D.3 203.7 405.4 626.2 236.2 254.8Gross Fixed Capital Formation P.51 664.5 676.5 660.7 690.4 742.4Capital Transfers D.9 133.4 115.3 167.5 297.2 162.1Other (b) 308.3 363.7 448.5 365.3 338.0

8. Gross Debt (c) 7,484.8 7,825.5 8,562.4 9,731.9 9,373.7

Notes:(a) P.11 + P.12 + P.131 + D.39rec + D.7rec + D.9rec (other than D.91rec).(b) D.29 + D.4pay (other than D.41pay) + D.5pay + D.7pay + P.5M + NP + D.8.(c) As defined in Council Regulation (EC) No 479/2009 (OJ L 145, 10.6.2009, p. 1).


beyond what was envisaged in Autumn 2020. Developments in the general Government budgetary execution in 2021, between subsequent forecasts, are outlined in Table 3.1.

On account of these revisions, while the revenue to GDP ratio is expected to remain relatively unchanged in 2021, the expenditure ratio to GDP is expected to increase further, such that the general Government balance is expected to worsen to -11.1 per cent of GDP. Total revenue is expected to remain unchanged at 36.2 per cent of GDP in 2021, while ratio of general Government expenditure to GDP is expected to increase by 1.3 percentage points to 47.3 per cent in 2021.

3.2 Budgetary plans for 2022Provided that the macroeconomic projections underlying this Plan materialise, the budget balance is expected to improve to a deficit of 5.6 per cent of GDP in 2022. In structural terms, the general Government deficit is expected to improve from -8.6 per cent in 2021 to -4.5 per cent in 2022. General Government budgetary targets are outlined in Table 2.a. Table 7 compares the budgetary targets and projections at unchanged policies in the Draft Budget Plan with those of the latest Update of the Stability Programme.

The general Government balance for 2022 was revised upwards by €25 million, compared to the estimated deficit of €826.1 million outlined in the 2021 Update of the Stability

Budgetary TargetsGeneral Government budgetary targets broken down by subsector

Table 2.a % GDP

ESA Code 2020 2021 2022 2023 2024

Net lending (+) / net borrowing (-) by sub-sector 1 B.91. General Government S.13 -9.7 -11.1 -5.6 -4.4 -2.92. Central Government S.1311 -9.7 -11.1 -5.6 -4.4 -2.93. State Government S.1312 - - - - -4. Local Government S.1313 -0.0 -0.0 -0.0 -0.0 -0.05. Social security funds S.1314 - - - - -6. Interest expenditure D.41 1.3 1.1 1.1 1.1 1.17. Primary balance2 -8.4 -9.9 -4.5 -3.3 -1.88. One-off and other temporary measures3 0.0 0.0 0.0 0.0 0.0

8.a Of which one-offs on the revenue side: general Government 0.0 0.0 0.0 0.0 0.0

8.b Of which one-offs on the expenditure side: general Government -0.0 0.0 0.0 0.0 0.0

9. Real GDP growth (%) (=1 in Table 1.a) -8.3 4.8 6.5 4.7 4.510. Potential GDP growth (%) (=2 in Table 1.a) 2.8 3.3 3.6 3.0 3.011. Output gap (% of potential GDP) -6.5 -5.1 -2.5 -0.9 0.4

12. Cyclical budgetary component (% of potential GDP) -3.1 -2.4 -1.2 -0.4 0.6

13. Cyclically-adjusted balance (1 - 12) (% of potential GDP) -6.6 -8.6 -4.4 -4.0 -3.5

14. Cyclically-adjusted primary balance (13 + 6) (% of potential GDP) -5.3 -7.5 -3.3 -2.9 -2.4

15. Structural balance (13 - 8) (% of potential GDP) -6.6 -8.6 -4.5 -4.0 -3.6

1 TR-TE= B.9.2 The primary balance is calculated as (B.9) plus (D.41, item 6).3 A plus sign means deficit-reducing one-off measures.


Programme (USP). These developments reflect higher estimated revenue in 2022 (€189 million), which is more than offset by an upward revision in general Government expenditure of €214 million, when compared to the projections outlined in the 2021 USP. A more buoyant than anticipated revenue outcome in 2021 (€211 million when compared to the USP projections), and higher revenue from the expected behavioural responses in respect to the relative tax bases and the revised fiscal impact of fiscal policy measures (€94 million), are expected to be in part offset by more subdued estimated macro-economic developments in 2022 (-€116 million). The main revision in general Government revenue compared to the estimates outlined in the 2021 USP relates to taxes on production and imports (€173 million), in particular revenue from VAT (€122 million). Other less significant revisions to revenue components include a €75 million upward revision to revenue from taxes on income in 2022. Meanwhile, higher than targeted expenditure compared to the estimates outlined in the 2021 USP of €214 million is mainly attributable to intermediate consumption (€156 million), compensation of employees (€74 million), and social payments (€73 million). These are in part offset

Divergence from latest SPTable 7 % GDP

ESA Code 2020 2021 2022 2023 2024

Real GDP growthStability Programme -7.1 3.8 6.9 4.5 4.0Draft Budgetary Plan -8.3 4.8 6.5 4.7 4.5Difference -1.2 1.0 -0.4 0.2 0.5

General Government net lending/ net borrowing EDP B.9Stability Programme -10.1 -12.0 -5.6 -3.9 -2.9Draft Budgetary Plan -9.7 -11.1 -5.6 -4.4 -2.9Difference 0.4 0.9 -0.0 -0.5 0.0

General Government net lending projection at un-changed policies EDP B.9

Stability Programme -10.1 -12.0 -6.8 -4.1 -3.1Draft Budgetary Plan -9.7 -11.1 -5.5 - -Difference 1 0.4 0.9 1.3 - -

Total Revenue TRStability Programme 36.5 36.7 36.6 36.2 35.7Draft Budgetary Plan 36.2 36.2 37.0 37.0 36.4Difference -0.2 -0.5 0.4 0.8 0.7

Total Expenditure TEStability Programme 46.6 48.7 42.2 40.1 38.6Draft Budgetary Plan 45.9 47.3 42.6 41.4 39.3Difference -0.7 -1.4 0.4 1.3 0.7

General Government gross debtStability Programme 54.3 65.0 65.8 66.0 65.6Draft Budgetary Plan 53.4 61.3 61.8 62.7 62.4Difference -0.8 -3.7 -3.9 -3.3 -3.2

1 This difference refer to both deviations stemming from changes in the macroeconomic scenario and those stemming from the effect of policy meas-ures taken between the submission of the SP and the submission of the DBP. Differences are also due to the fact that the no-policy change scenario is defined differently for the purpose of this Code of Conduct with respect to the Stability Programme.


by a downward revision in capital transfers of €135 million, as financial assistance to the national airline is no longer envisaged for 2022. Table 3.1a distinguishes the changes to the

General Government Budgetary Developments in 2022Divergence from previous forecasts

Table 3.1a € millions

USP 2021 compared to DBP 2022

ESA Code

Divergence due to

expected out-turn in t-1

Divergence due to up-

dated macro-economic

projections

Other revi-sions

Total fore-cast revi-

sion

Net lending (+)/net borrowing (-)1. General Government S.13 211 -134 -101 -252. Central Government S.1311 211 -134 -101 -253. State Government S.1312 - - - -4. Local Government S.1313 0 0 0 05. Social Security funds S.1314 - - - -

For the General Government

6. Total Revenue TR 211 -116 94 189Of which

Taxes on Production and Imports D.2 67 2 104 173Of which

Value Added Type Taxes (VAT) D.211 51 -8 79 122Taxes on Financial and Capital Transactions D.214C -4 4 1 1

Current Taxes on Income, Wealth, etc. D.5 141 -104 38 75Of which

Taxes on Individual or Household Income D.51M 17 -33 39 22Taxes on the income or profits of Corporations D.51O 126 -71 0 55

Capital Taxes D.91 -5 0 5 0Social Contributions D.61 8 -14 6 -0Of which

Employers’ Actual Pension Contributions D.611 -7 -6 11 -1Households’ actual social contributions D.613 14 -9 -5 1

Property Income D.4 -13 -13Other (a) -46 -46

7. Total Expenditure TE 0 18 195 214Of which

Compensation of employees D.1 74 74Intermediate Consumption P.2 156 156Social Payments D.6 18 54 73Of which

Unemployment expenditure 18 0 18Interest Expenditure D.41 3 3Subsidies D.3 19 19Gross Fixed Capital Formation P.51 52 52Capital Transfers D.9 -135 -135Other (b) -27 -27

Notes:(a) P.11 + P.12 + P.131 + D.39rec + D.7rec + D.9rec (other than D.91rec).(b) D.29 + D.4pay (other than D.41pay) + D.5pay + D.7pay + P.5M + NP + D.8.


2022 forecasts between successive reports due to the impact of the estimated outturn in 2021 (base effect), macroeconomic determinants, and other changes.

The general Government gross debt ratio is expected to increase by 0.5 percentage points to 61.8 per cent of GDP in 2022, remaining above the 60 per cent Maastricht Treaty threshold. The upward pressure emanating from the projected

Contingent LiabilitiesTable 2.c % of GDP

2021 2022

Public guarantees 9.4 8.4

primary deficit and interest payments are expected to offset the positive impact of nominal GDP growth. Developments in general Government debt are presented in Table 2.b. Debt developments data, consistent with the detailed budgetary targets and macroeconomic forecasts, is complemented with data on contingent liabilities in Table 2.c and Table 2.c.i. A detailed account of the Stock-Flow adjustments can be found in Appendix Table 7.

Stock of guarantees adopted/announced at June 2021 according to the PlanTable 2.c.i % of GDP

Measure

Maximum amount of contingent liabilities

(% of GDP)

Estimated take-up

(% of GDP)

In response to COVID-19

Malta Development Bank - COVID-19 Guarantee Scheme 2.5 1.2 EU SURE loan instrument 0.2 0.2

Subtotal 2.7 1.3

OthersNon-financial corporations 7.2 5.4 Financial corporations 3.4 1.7 Households and NPISHs 0.1 0.1

Subtotal 10.6 7.2 Total 13.3 8.5

3.2.1 Discretionary measuresA list of the main discretionary measures included in the Draft Budget Plan and underpinning the expenditure and revenue targets for 2022 is presented in Table 5.a. The net impact on the budget balance of temporary and permanent discretionary revenue measures for 2022 (including those implemented in previous budgets but which will still have an impact in 2022) is estimated at 0.12 per cent of GDP. Meanwhile, incremental discretionary expenditure measures (including those implemented in previous budgets but which will still have an impact in 2022), are expected to improve the budget balance of 2022 by 3.5 per cent of GDP.

The 2022 Budget aims to strengthen further the distributional policies enacted in recent years with the objective of strengthening social inclusion, promote social mobility and reduce poverty while providing the conditions for the economy to recover from the impact of COVID-19 and creating employment within the framework of inclusive economic growth, whilst facilitating the twin Green and Digital transitions.

The Budget for 2022 will continue to enhance the disposable income of low and middle-income earners and incentivise people to work by extending and increasing measures


which are aimed at making work pay. Such measures include the In-Work Benefit Scheme, the taper of benefits and the reduction of tax burden on workers, through tax rebates and lower tax on part-time and overtime work. Free childcare services will be extended to evenings and weekends for people working shifts to ease labour supply shortages in specific sectors. The 2022 Budget includes a number of measures aimed at financially enhancing the pensioners’ and elderly’s income and also supporting the provision of informal long-term care. Most pensions, both contributory and non-contributory pensions will increase in excess of the customary cost of living adjustment (COLA). The taxable ceiling on pensions will also be raised. Other measures include the support to households that hire private help at home.

Description of discretionary measures included in the Draft Budget Plan1

Discretionary measures taken by General GovernmentTable 5.a

Measures

ESA Code (Expenditure

/ Revenue component)

Date of adoption Budgetary Impact (% of GDP)

2020 2021 2022 2023 2024

Temporary measures2

Reduced tax on the transfer of immovable property D2, D5 - R 2014 - 2024 -0.42 -0.01 0.39 0.20 0.00

Reduced Excise Duty D2 - R 2020 -0.06 0.06 0.00 0.00 0.00

Budget measures enabling business activity D2 - R 2019 - 2021 0.00 -0.06 0.00 0.00 0.00

Fiscal incentives for private pensions D5 - R 2019 - 2021 -0.00 -0.03 0.00 0.00 0.00

Various medical supplies and equipment in relation to COVID-19 P2 - E 2020 - 2021 -0.57 0.21 0.36 0.00 0.00

Cargo Transportation and Repatriation P2 - E 2020 -0.38 0.38 0.00 0.00 0.00

Tourism Regeneration Plan D3 - E 2021 0.00 -0.14 0.14 0.00 0.00

Short Term Social Measures D6 - E 2020 -0.11 0.10 0.02 0.00 0.00

COVID-19 Business Assistance Programme and the Economic Regeneration Voucher Scheme D3 - E 2020 - 2021 -3.64 0.84 2.80 0.00 0.00

Subtotal -5.18 1.34 3.71 0.20 0.00

Non-temporary measures2

Revenue from the Individual Investor Programme P10 - R 2014 -0.20 -0.29 -0.28 -0.02 -0.01

Provision for unrecoverable deferred taxes and a revision in the applicable interest rates and penalties due on unsettled tax balances

D2, D5, D61 - R 2022 -0.06 -0.05 0.14 -0.00 -0.00

Revision to personal income tax rates and thresholds applicable on pension income, income from overtime and from part-time employment

D5 - R 2022 - 2024 -0.04 0.01 -0.10 0.01 0.01

Government-guaranteed loans schemes D3 - E 2020 -0.01 -0.08 0.02 0.07 0.00

Housing Programmes D6 - E 2020 -0.12 -0.01 -0.05 -0.01 -0.00

Measures to address housing affordability, pension adequacy and the integration of vulnerable individuals in society; cash payments by Government to households

D6 - E 2016 - 2024 -0.45 -0.10 -0.20 -0.00 0.06

Financial support to the national airline D9 - E 2021 0.00 -0.21 0.21 0.00 0.00

Other revenue measures, including measures legislated in previous budgets 0.01 -0.01 -0.03 -0.03 -0.03

Other expenditure measures, including measures legislated in previous budgets and projects financed from the National Development and Social Fund

-0.17 -0.24 0.18 0.03 0.02

Subtotal -1.03 -1.00 -0.10 0.05 0.05

Total -6.21 0.35 3.61 0.25 0.05

1 Excluding those measures that are planned to be financed by grants under the RRF. 2 For the purpose of this table, temporary measures refer to those discretionary measures that have no budgetary impact beyond 2022, which corresponds to the end of the Commission spring 2021 forecast horizon. By contrast, those measures adopted or announced for 2020, 2021 or 2022 that continue to have a fiscal effect of 0.1% of GDP or greater until at least 2023 are considered as ‘non-temporary’ for the purpose of this table.


By means of the forthcoming year’s Budget, the Government will continue to support incomes through income supplements and bonuses linked to childbirth or adoption, with a specific focus on low-income households. The Government will also be increasing the stipend allowance provided to students by 10 per cent.

Several policy measures which had been put in place in previous years, intended to ensure affordable housing availability, were extended and widened in scope, while the temporary measures introduced to support the property market during the pandemic were not renewed.

In addition, in terms and for the purposes of Article 31 of the Fiscal Responsibility Act, the annual contribution to the ‘Contingency Reserve’ account is expected to amount to €13.3 million in 2021.

3.3 Expenditure and Revenue TargetsGeneral Government expenditure and revenue targets are presented in Table 4.a, while Table 4.b outlines the components necessary for the computation of the expenditure

Expenditure and Revenue TargetsGeneral Government expenditure and revenue targets, broken down by main compo-

nentsTable 4.a % GDP

ESA Code 2021 2022

General Government (S13)1. Total revenue target TR 36.2 37.0

Of which1.1. Taxes on production and imports D.2 10.8 12.31.2. Current taxes on income, wealth, etc D.5 13.2 13.21.3. Capital taxes D.91 0.1 0.21.4. Social contributions D.61 6.2 6.01.5. Property income D.4 0.6 0.51.6. Other 1 5.3 4.9p.m.: Tax burden 30.5 31.8

(D.2+D.5+D.61+D.91-D.995)2

2. Total expenditure target TE3 47.3 42.6Of which

2.1. Compensation of employees D.1 12.6 12.22.2. Intermediate consumption P.2 9.6 9.42.3. Social payments D.6M 10.3 10.0

of which Unemployment benefits 3 0.4 0.32.4. Interest expenditure (= item 6 in Table 2.a) D.41 1.1 1.12.5. Subsidies D.3 4.5 1.72.6. Gross fixed capital formation P.51G 4.7 4.92.7. Capital transfers D.9 1.2 1.12.8. Other 4 3.2 2.2

1 P.10 + D.39rec + D.7rec + D.9rec (other than D.91rec).2 Tax revenue, including those collected by the EU and including an adjustment for uncollected taxes and social contributions D.995), if appropriate.3 Includes cash benefits (D.621 and D.624) and in kind benefits (D.632) related to unemployment benefits.4 D.29pay + D.4pay (other than D.41pay) + D.5pay + D.7pay + P.5M + NP + D.8.


Expenditure and Revenue TargetsAmounts to be excluded from the expenditure benchmark

Table 4.b % GDP

ESA Code 2020 2020 2021 2022Level (€ millions)

1. Expenditure on EU programmes fully matched by EU funds revenue 149.0 1.1 1.7 1.8

1.a of which ‘Investment fully matched by EU funds revenue 63.7 0.5 0.8 1.1

2. Cyclical unemployment benefit expenditure 1 0.0 0.0 0.0 -0.03. Effect of discretionary revenue measures 2 -113.1 -0.8 -0.4 0.14. Revenue increases mandated by law - - - -

1 The cyclical unemployment benefit expenditure is calculated by multiplying the gap between the Non-Accelerating Wage Rate of Unemployment (NAWRU) and the unemployment rate (expressed in terms of the unemployment rate) by the total unemployment benefit expenditure. Data for the NAWRU and the unemployment rate is obtained from the latest update of the AMECO Database, while data for the total unemployment benefit expenditure is as defined in COFOG under the code 10.5.

2 Revenue increases mandated by law is not included in the effect of discretionary revenue measures: data reported in rows 3 and 4 are mutually exclusive.

General Government Expenditure by FunctionGeneral Government Expenditure on Education, Healthcare and Employment

Table 4.c.i

2021 2022

% of GDP % of gG expenditure % of GDP % of gG

expenditure

Education (= item 9 in table 4.c.ii) 6.5 13.8 6.1 14.4Health (= item 7 in table 4.c.11) 6.7 14.2 6.6 15.4Employment n.a. n.a. n.a. n.a.

benchmark. A breakdown of the general Government expenditure by function is contained in the corresponding Table 4.c.i and Table 4.c.ii.

Whilst the revenue to GDP ratio is expected to recover in 2022, the expenditure ratio to GDP is expected to decline in 2022, such that the general Government balance is expected to improve to -5.6 per cent of GDP.

Total revenue is expected to increase to 37.0 per cent of GDP in 2022, primarily reflecting an increase of 1.5 percentage points of GDP in the tax revenue ratio (excluding social contributions). Indeed, the ratio of taxes on production and imports is expected to increase by 1.5 percentage points of GDP as domestic demand conditions improve. The ratios of current taxes on income and wealth and capital taxes are expected to remain unchanged.


General Government Expenditure by FunctionClassification of the Functions of the Government

Table 4.c.ii

Percentages of GDP COFOG Code 2021 2022

1. General public services 1 6.7 6.02. Defence 2 0.8 0.83. Public order and safety 3 1.4 1.44. Economic affairs 4 9.1 6.35. Environmental protection 5 1.9 1.86. Housing and community amenities 6 0.5 0.47. Health 7 6.7 6.68. Recreation, culture and religion 8 1.6 1.49. Education 9 6.5 6.110. Social protection 10 12.2 11.811. Total Expenditure (=item 2 in Table 4.a) TE 47.3 42.6

Expenditure and Revenue Projections under the no-policy change scenario 1

(General Government expenditure and revenue projections at unchanged policies broken down by main components)

Table 3 % GDP

ESA Code 2021 2022

General Government (S13)1. Total revenue at unchanged policies TR 36.2 37.4

Of which1.1. Taxes on production and imports D.2 10.8 12.41.2. Current taxes on income, wealth, etc D.5 13.2 13.21.3. Capital taxes D.91 0.1 0.21.4. Social contributions D.61 6.2 6.01.5. Property income D.4 0.6 0.51.6. Other 2 5.3 5.1p.m.: Tax burden 30.5 31.9

(D.2+D.5+D.61+D.91-D.995)3

2. Total expenditure at unchanged policies TE 47.3 42.9Of which

2.1. Compensation of employees D.1 12.6 12.22.2. Intermediate consumption P.2 9.6 9.42.3. Social payments D.6M 10.3 10.2

of which Unemployment benefits 4 0.4 0.32.4. Interest expenditure D.41 1.1 1.12.5. Subsidies D.3 4.5 1.72.6. Gross fixed capital formation P.51 4.7 4.92.7. Capital transfers D.9 1.2 1.12.8. Other 5 3.2 2.2

1 Data for 2018-2020 is equivalent to the data presented in Table 4.a. The no-policy change scenario for the forthcoming year (2021) onwards involves the extrapolation of revenue and expenditure trends after deducting the impact of temporary measures of the current year and before adding the impact of the measures included in the forthcoming year’s budget.

2 P.10 + D.39rec + D.7rec + D.9rec (other than D.91rec).3 Tax revneue, Including those collected by the EU and including an adjustment for uncollected taxes and social contributions D.995), if appropriate.4 Includes cash benefits (D.621 and D.624) and in kind benefits (D.632) related to unemployment benefits.5 D.29pay + D.4pay (other than D.41pay) + D.5pay + D.7pay + P.5M + NP + D.8.


The ratio of general Government expenditure to GDP is expected to decline by 4.7 percentage points to 42.6 per cent in 2022, largely reflecting a decline of 2.8 percentage points in the subsidies to GDP ratio as COVID-19 related measures are phased out completely by end 2021.

3.4 Expenditure and Revenue Targets under the No-PolicyChange Assumption

In 2022, tax revenues are expected to be more buoyant than economic developments. Tax revenues are expected to grow by around 13 per cent, with an implied elasticity of tax revenue to GDP under the no-policy change scenario estimated at 1.6. As a result, on a no-policy change basis, the tax burden would increase by 1.5 percentage points to 31.9 per cent of GDP, as shown in Table 3. This development mainly reflects a higher ratio for taxes on production and imports, as the economic recovery in 2022 is expected to be tax-rich. This is primarily underpinned by the expected recovery in tourist expenditure which is expected to raise the tax base for VAT substantially in excess of GDP growth, thereby raising temporarily the implicit elasticity to GDP in 2022.

At unchanged policies, total expenditure would decline by 4.4 percentage points of GDP, mainly reflecting a lower ratio for subsidies.


Stock Flow Adjustment StatementAppendix Table 7 € million

2020 2021 2022 2023 2024

General Government balance -1,267.9 -1,545.0 -850.7 -707.0 -496.0

ESA adjustments 201.7 -25.1 -113.6 -9.1 -4.1

Contribution to Sinking Fund (Local) 0.0 0.0 0.0 0.0 0.0Contribution to Sinking Fund (Foreign) 0.1 0.1 0.1 0.1 0.0Contribution to Special MGS Sinking Fund 20.0 30.0 25.0 25.0 25.0Equity Acquisition 37.0 15.0 5.0 0.5 0.5Courts and other deposits -36.8 0.0 0.0 0.0 0.0Stock Premium paid to Church 0.0 0.3 0.1 0.2 0.1Repayment of Loans to Government -0.9 -2.2 -2.8 -2.8 -2.8Sale of Assets -0.9 -0.9 -0.9 -0.9 -0.9Sale of Non-Financial Assets - - - - -EBUs -5.9 -0.5 0.0 0.0 0.0Currency 1.2 10.0 5.1 5.7 6.2Movement in Bank Account -12.5 - - - -ESA Re-routed Debt 23.5 12.3 15.0 5.0 0.0Other Statistical Discrepancies - - - - -Increase/(Decrease)in cash balance -31.8 31.0 -1.0 -0.8 0.7

Increase/(Decreaese) in Non-Consolidated Debt 1462.5 1615.0 782.7 729.8 520.8

MGS Consolidation -187.8 -30.1 28.6 19.2 35.5

Increase/(Decreaese) in Consolidated Debt 1274.7 1584.9 811.4 749.0 556.4

SFA 6.8 39.9 -39.4 42.0 60.4


RRF Impact on Projections - GrantsTable 9.a % of GDP

ESA Code 2020 2021 2022 2023 2024 2025 2026

Revenue from RRF GRANTSRRF GRANTS as included in the revenue projections 0.0 0.0 0.5 0.6 0.6 0.2 0.1Cash disbursements of RRF GRANTS from EU 0.0 0.3 0.3 0.4 0.3 0.3 0.2

Expenditure financed from RRF GRANTSTotal Current Expenditure 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total Capital Expenditure1 0.0 0.1 0.5 0.6 0.6 0.1 0.1of which:

Gross fixed capital formation P.51g 0.0 0.1 0.5 0.6 0.6 0.1 0.1Capital transfers D.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other costs financed by RRF GRANTS2

Financial transactions 0.0 0.0 0.0 0.0 0.0 0.0 0.0of which:

Reduction in tax revenue 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other costs with impact on revenue 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1 Projected expenditure financed from RRF grants is incorporated on a technical basis in amounts equivalent to projected revenue as included in the revenue projections.2 This covers costs that are not recorded as expenditure in national accounts.

RRF Impact on Projections - LoansTable 9.b % of GDP

ESA Code 2020 2021 2022 2023 2024 2025 2026

Cash flow from RRF loans projected in the programmeDisbursements of RRF LOANS from EU - - - - - - -Repayments of RRF LOANS to EU - - - - - - -

Expenditure financed from RRF loansTotal Current Expenditure - - - - - - -Total Capital Expenditure - - - - - - -of which:

Gross fixed capital formation P.51g - - - - - - -Capital transfers D.9 - - - - - - -

Other costs financed by RRF loans1

Financial transactions - - - - - - -of which:

Reduction in tax revenue - - - - - - -Other costs with impact on revenue - - - - - - -

1 This covers costs that are not recorded as expenditure in national accounts.


Appendix Table 6.a Indications on how the measures in the DBP address the Recommendations

Reco

mm

enda

tions

Lis

t of M

easu

res

Desc

riptio

n of

dire

ct re

leva

nce

Reco

mm

enda

tion

1: In

20

22, m

aint

ain

a su

ppor

tive

fisca

l st

ance

, inc

ludi

ng th

e im

puls

e pr

ovid

ed b

y th

e R

ecov

ery

and

Resi

lienc

e Fa

cilit

y,

and

pres

erve

na

tiona

lly fi

nanc

ed

inve

stm

ent.

Supp

ortiv

e bu

dget

ary

polic

y in

20

22,

incl

udin

g th

e im

puls

e pr

ovid

ed b

y th

e R

ecov

ery

and

Res

ilienc

e Fa

cilit

y

With

a v

iew

to s

usta

inin

g th

e re

cove

ry, t

he M

alte

se G

over

nmen

t is

set t

o m

aint

ain

a su

ppor

tive

budg

etar

y po

licy

in 2

022,

allo

win

g fo

r the

impa

ct o

f the

Rec

over

y an

d R

esilie

nce

Faci

lity

to fu

nd a

dditi

onal

hig

h-qu

ality

inve

stm

ent p

roje

cts

and

stru

ctur

al re

form

s.

The

assu

med

eco

nom

ic re

cove

ry is

exp

ecte

d to

boo

st ta

xatio

n re

ceip

ts o

ver t

he c

ours

e of

the

next

yea

r and

by

end

of 2

022,

tax

reve

nue

is e

stim

ated

to e

xcee

d th

e le

vel t

hat w

as re

cord

ed p

rior t

o th

e pa

ndem

ic. G

ener

al G

over

nmen

t exp

endi

ture

is e

stim

ated

to

dec

line

in 2

022,

as

the

tem

pora

ry s

uppo

rt m

easu

res

are

expe

cted

to b

e ph

ased

out

, in

line

with

Gov

ernm

ent’s

com

mitm

ent t

o co

ntai

n ex

pend

iture

as

the

publ

ic h

ealth

situ

atio

n im

prov

es a

nd th

e ec

onom

y re

cove

rs. A

s a

resu

lt, th

e G

over

nmen

t def

icit

is

proj

ecte

d to

sta

nd a

t 5.6

per

cen

t in

2022

whi

lst t

he d

ebt-t

o-G

DP

ratio

is e

xpec

ted

to re

ach

61.8

per

cen

t. M

alta

's R

ecov

ery

and

Res

ilienc

e Pl

an in

clud

es a

n ex

tens

ive

set o

f mut

ually

rein

forc

ing

refo

rms

and

inve

stm

ents

that

con

tribu

te

to e

ffect

ivel

y ad

dres

sing

all

or a

sig

nific

ant s

ubse

t of t

he re

leva

nt e

cono

mic

and

soc

ial c

halle

nges

out

lined

in th

e co

untry

-spe

cific

re

com

men

datio

ns a

ddre

ssed

to M

alta

by

the

Cou

ncil

in th

e Eu

rope

an S

emes

ter i

n 20

19 a

nd in

202

0.

• Th

e pl

an in

clud

es a

bro

ad ra

nge

of c

limat

e-re

late

d m

easu

res,

with

two

com

pone

nts

mak

ing

a m

ajor

and

dire

ct c

ontri

butio

n to

th

e gr

een

trans

ition

. Suc

h m

easu

res

incl

ude

build

ing

reno

vatio

ns, a

new

ferry

land

ing

site

to s

hift

trans

port

from

road

to s

ea, a

nd

refo

rms

that

will

esta

blis

h ca

r-fre

e sp

aces

in u

rban

are

as a

nd g

rant

free

acc

ess

to p

ublic

tran

spor

t to

all M

alte

se n

atio

nals

and

M

alte

se re

side

nts

to re

duce

the

high

cos

ts o

f con

gest

ion.

•

The

plan

add

ress

es d

igita

l-rel

ated

cha

lleng

es in

mul

tiple

are

as. T

hree

com

pone

nts

cont

ribut

e to

dig

ital o

bjec

tives

, inc

ludi

ng

thro

ugh

the

digi

talis

atio

n of

pub

lic s

ervi

ces

and

the

adop

tion

of d

igita

l tec

hnol

ogie

s in

com

pani

es, t

he h

ealth

and

the

just

ice

sect

or.

• It i

nclu

des

sign

ifica

nt m

easu

res

to c

ontri

bute

to p

rovi

de s

tude

nts

and

lear

ners

with

qua

lity

voca

tiona

l edu

catio

n po

ssib

ilitie

s in

th

e to

uris

m s

ecto

r as

wel

l as

stre

ngth

en e

mpl

oym

ent p

olic

y m

easu

res

and

supp

ort t

he s

hift

tow

ards

pen

sion

sus

tain

abilit

y. T

hese

in

itiat

ives

aim

to c

ontin

ue re

duce

Mal

ta’s

Ear

ly S

choo

l Lea

ving

rate

and

to a

sses

s ad

equa

cy o

f une

mpl

oym

ent b

enef

its, w

hils

t fo

ster

ing

fisca

l sus

tain

abilit

y.

• Fur

ther

mor

e, th

e R

RP

incl

udes

als

o m

easu

res

targ

eted

to s

treng

then

the

resi

lienc

e of

the

heal

th s

yste

m th

roug

h po

licy

refo

rms

and

inve

stm

ents

focu

sing

on

prev

entio

n m

easu

res,

impr

ovin

g m

edic

al s

ervi

ces

and

treat

men

ts a

nd s

treng

then

ing

the

heal

th o

f th

e w

orkf

orce

. Pr

eser

ve n

atio

nally

-fin

ance

d in

vest

men

t C

apita

l exp

endi

ture

, inc

ludi

ng g

ross

fixe

d ca

pita

l for

mat

ion

and

capi

tal t

rans

fers

, is

expe

cted

to a

vera

ge 5

.6 p

er c

ent o

f GD

P be

twee

n 20

21 a

nd 2

024,

as

com

pare

d to

an

aver

age

of 4

.4 p

er c

ent i

n th

e 10

yea

rs b

etw

een

2011

and

202

0. N

atio

nally

-fina

nced

in

vest

men

t (G

FCF)

is e

xpec

ted

to re

gist

er u

npre

cede

nted

hig

hs o

f aro

und

€570

milli

on in

202

2 an

d 20

23. T

his

expe

nditu

re is

fu

rther

sus

tain

ed b

y th

e R

ecov

ery

and

Res

ilienc

e Fa

cilit

y, w

hich

is e

xpec

ted

to fu

nd a

dditi

onal

hig

h-qu

ality

inve

stm

ent p

roje

cts

and

stru

ctur

al re

form

s, a

s w

ell a

s pr

ojec

ts fu

nded

from

the

Mul

tiann

ual F

inan

cial

Fra

mew

ork

(MFF

) for

the

perio

d 20

21-2

027.

Re

com

men

datio

n 2:

W

hen

econ

omic

co

nditi

ons

allo

w,

purs

ue a

fisc

al p

olic

y ai

med

at a

chie

ving

pr

uden

t m

ediu

m-te

rm fi

scal

po

sitio

ns a

nd

ensu

ring

fisca

l su

stai

nabi

lity

in th

e m

ediu

m te

rm.

At th

e sa

me

time,

en

hanc

e in

vest

men

t to

boos

t gro

wth

po

tent

ial.

Whe

n ec

onom

ic

cond

ition

s al

low

, pu

rsue

a fi

scal

pol

icy

aim

ed a

t ach

ievi

ng

prud

ent m

ediu

m-

term

fisc

al p

ositi

ons

and

ensu

ring

fisca

l su

stai

nabi

lity

in th

e m

ediu

m-te

rm

For n

ext y

ear,

as e

cono

mic

gro

wth

is e

xpec

ted

to re

cove

r fro

m th

e ex

cept

iona

l im

pact

of t

he p

ande

mic

, the

def

icit

is e

xpec

ted

to fa

ll to

5.6

%, w

hile

deb

t inc

reas

es m

argi

nally

to 6

1.8%

of G

DP.

For

the

perio

d be

yond

202

2, d

epen

ding

on

the

stre

ngth

of t

he

reco

very

and

fis

cal s

usta

inab

ility

cons

ider

atio

ns,

the

Mal

tese

Gov

ernm

ent

shal

l con

side

r fis

cal p

olic

ies

that

atta

in a

pru

dent

m

ediu

m-te

rm fi

scal

pos

ition

. Whi

le th

e le

vel o

f unc

erta

inty

rega

rdin

g th

e sh

ort-

and

med

ium

-term

pat

h fo

r the

eco

nom

y re

mai

ns

sign

ifica

nt. T

he ta

rget

s pr

esen

ted

alre

ady

in th

e M

ediu

m T

erm

Fis

cal S

trate

gy a

nd c

onfir

med

in th

is P

lan

are

cons

iste

nt w

ith a

m

easu

re o

f con

trol i

n th

e gr

owth

of p

ublic

spe

ndin

g ai

med

at e

nsur

ing

a gr

adua

l ann

ual i

mpr

ovem

ent i

n th

e st

ruct

ural

bud

get

bala

nce

of a

t lea

st h

alf a

per

cent

age

poin

t of G

DP.

In th

is c

onte

xt, c

ogni

sant

of t

he p

ositi

ve b

earin

g th

at fi

scal

con

solid

atio

n an

d su

stai

nabl

e de

bt le

vels

hav

e on

pot

entia

l gro

wth

, the

Gov

ernm

ent r

emai

ns c

omm

itted

to g

radu

ally

bal

ance

the

budg

et o

ver t

he

econ

omic

cyc

le, w

hen

econ

omic

con

ditio

ns a

llow

. Ind

eed,

the

defic

it is

exp

ecte

d to

con

tinue

to d

eclin

e in

the

follo

win

g ye

ars

to

2.9%

of G

DP

by 2

024,

whi

le th

e de

bt ra

tio is

exp

ecte

d to

sta

rt fa

lling

in 2

024

to re

ach

62.4

% in

the

sam

e ye

ar.

Hig

her i

nves

tmen

t to

boos

t gro

wth

po

tent

ial

In re

cent

yea

rs, G

over

nmen

t sup

porte

d a

robu

st in

crea

se in

pub

lic in

vest

men

t in

infra

stru

ctur

e, w

hich

inco

rpor

ates

the

arte

rial

and

urba

n ro

ads’

net

wor

ks a

nd o

ther

tran

spor

tatio

n fa

cilit

ies

with

the

scop

e to

add

ress

the

infra

stru

ctur

al g

ap th

at e

mer

ged

in

the

seco

nd h

alf o

f the

pas

t dec

ade.

Inve

stm

ent i

n ro

ads

was

als

o ex

tend

ed in

resi

dent

ial a

nd ru

ral a

reas

. The

Gov

ernm

ent i

s co

mm

itted

to c

ontin

ue w

ith it

s in

vest

men

t in

publ

ic tr

ansp

orta

tion,

thro

ugh

an im

prov

ed n

etw

ork,

a m

ore

mod

ern

fleet

and

wid

er

acce

ssib

ility.

To

cont

inue

pro

mot

ing

alte

rnat

ive

mod

es o

f tra

nspo

rt in

par

ticul

ar th

at b

y se

a, in

vest

men

t in

the

reno

vatio

n of

a

num

ber o

f bre

akw

ater

s an

d m

arin

e in

frast

ruct

ure

is b

eing

pla

nned

.


In th

e co

min

g ye

ars,

in o

rder

to a

ttrac

t dig

ital a

nd r

enew

able

ene

rgy

inve

stm

ents

into

Mal

ta, f

isca

l inc

entiv

es w

ill co

ntin

ue to

su

ppor

t in

nova

tive,

gre

en a

nd d

igita

l inv

estm

ents

by

busi

ness

es.

Thro

ugh

sche

mes

suc

h as

Cha

nge

to G

row

and

Sm

art &

Su

stai

nabl

e In

vest

men

t, fin

anci

al a

id is

pro

vide

d to

driv

e th

e tra

nsfo

rmat

ion

tow

ards

mor

e su

stai

nabl

e an

d di

gitis

ed o

pera

tions

. C

arbo

n ne

utra

lity

is a

n in

tegr

al p

art o

f Mal

ta's

econ

omic

vis

ion.

The

Gov

ernm

ent w

ill ac

cele

rate

the

ongo

ing

effo

rts to

war

ds

incr

easi

ng e

nerg

y-ef

ficie

ncy

in b

uild

ings

. The

Low

Car

bon

Dev

elop

men

t Stra

tegy

pro

pose

s in

cent

ives

for

gre

ener

bui

ldin

gs,

thro

ugh

a si

gnifi

cant

inc

reas

e in

bud

gets

for

gre

en p

lann

ing.

Var

ious

pro

ject

s of

urb

an g

reen

ing

will

be u

nder

take

n. T

he

cons

olid

atio

n an

d up

grad

ing

of th

e na

tiona

l was

te in

frast

ruct

ure,

the

larg

est i

nves

tmen

t und

erta

ken

in W

aste

Man

agem

ent i

n M

alta

, will

allo

w M

alta

to m

ove

to a

circ

ular

eco

nom

y.

Ove

r th

e pa

st d

ecad

e, e

lect

ricity

dem

and

has

been

pro

gres

sive

ly in

crea

sing

in r

efle

ctio

n of

gro

wth

in t

he e

cono

my

and

the

popu

latio

n si

ze a

nd is

set

to c

ontin

ue in

crea

sing

. A s

econ

d el

ectri

city

inte

rcon

nect

or c

able

bet

wee

n M

alta

and

Ital

y w

ill ad

d a

200M

W s

ourc

e of

ele

ctric

ity. I

t will

also

del

iver

a m

ore

resi

lient

ele

ctric

ity g

rid th

at a

ccom

mod

ates

larg

e-sc

ale

rene

wab

le e

nerg

y ge

nera

tion,

mai

nly

offs

hore

. The

Gov

ernm

ent w

ill co

ntin

ue to

pur

sue

the

hydr

ogen

-read

y pi

pelin

e pr

ojec

t, w

hich

has

now

bee

n se

cure

d as

an

EU P

roje

ct o

f Com

mon

Inte

rest

. The

pla

n w

ill co

ntin

ue to

pro

vide

sch

emes

to in

cent

ivis

e th

e us

e of

rene

wab

le

ener

gy s

ourc

es in

hou

seho

lds.

Th

e M

alte

se e

cono

my'

s de

pend

ence

on

tour

ism

was

hig

hlig

hted

dur

ing

the

CO

VID

-19

pand

emic

. Fol

low

ing

a si

gnifi

cant

glo

bal

tour

ism

cris

is, t

he M

alte

se G

over

nmen

t is

com

mitt

ed to

enh

ance

inve

stm

ent a

nd p

rom

otio

n to

war

ds 's

afe

tour

ism

', in

ord

er to

po

sitio

n M

alta

as

a sa

fe d

estin

atio

n, m

axim

isin

g in

boun

d to

uris

m.

Reco

mm

enda

tion

3:

Pay

parti

cula

r at

tent

ion

to th

e co

mpo

sitio

n of

pub

lic

finan

ces,

bot

h on

the

reve

nue

and

expe

nditu

re s

ides

of

the

budg

et, a

nd to

the

qual

ity o

f bud

geta

ry

mea

sure

s, to

ens

ure

a su

stai

nabl

e an

d in

clus

ive

reco

very

. Pr

iorit

ise

sust

aina

ble

and

grow

th-e

nhan

cing

in

vest

men

t, no

tabl

y su

ppor

ting

the

gree

n an

d di

gita

l tra

nsiti

on.

Giv

e pr

iorit

y to

fisc

al

stru

ctur

al re

form

s th

at

will

hel

p pr

ovid

e fin

anci

ng fo

r pub

lic

polic

y pr

iorit

ies

and

cont

ribut

e to

the

long

-te

rm s

usta

inab

ility

of

publ

ic fi

nanc

es,

incl

udin

g by

The

com

posi

tion

of

publ

ic fi

nanc

es, b

oth

on th

e re

venu

e an

d ex

pend

iture

sid

es o

f th

e bu

dget

In r

ecen

t ye

ars,

ref

orm

s ha

ve f

ocus

ed o

n sh

iftin

g th

e ta

x bu

rden

aw

ay f

rom

lab

our,

wid

enin

g ta

x ba

ses

whi

lst

tack

ling

envi

ronm

enta

l con

cern

s, fu

rther

sim

plify

ing

the

tax

syst

em, a

nd c

omba

tting

tax

evas

ion

and

avoi

danc

e. E

xten

sive

inve

stm

ent i

s be

ing

purs

ued

for i

nves

tigat

ion

purp

oses

, alo

ng w

ith p

rofe

ssio

nal t

rain

ing

prog

ram

me

offe

red

by in

tern

atio

nal e

xper

ts fo

r rel

evan

t pe

rson

nel.

The

Gov

ernm

ent’s

tax

atio

n st

rate

gy s

eeks

to

ensu

re t

hat

reve

nue

stre

ams

from

tax

atio

n ar

e su

stai

nabl

e an

d su

ppor

tive

to th

e at

tain

men

t of i

ts fi

scal

, eco

nom

ic a

nd w

elfa

re g

oals

. Th

e co

ntin

uous

stre

ngth

enin

g of

the

inst

itutio

nal c

apac

ity o

f Mal

ta’s

fisc

al fr

amew

ork

sust

aine

d th

e co

nsis

tent

impr

ovem

ent i

n th

e G

over

nmen

t’s fi

scal

pos

ition

in re

cent

yea

rs. C

ompr

ehen

sive

spe

ndin

g re

view

s re

info

rced

the

Mal

tese

Gov

ernm

ent's

stra

tegy

to

ens

ure

the

achi

evem

ent o

f a m

ore

effic

ient

and

effe

ctiv

e ap

proa

ch to

pub

lic s

pend

ing,

impr

ovin

g on

the

polic

y pr

oces

s w

hile

al

so e

nsur

ing

that

pub

lic s

pend

ing

is re

flect

ive

of c

hang

ing

prio

ritie

s an

d ch

angi

ng s

ocia

l nee

ds.

Budg

et 2

022

mea

sure

s fo

r a

sust

aina

ble

and

incl

usiv

e re

cove

ry

The

2022

Bud

get a

ims

to s

treng

then

furth

er th

e di

strib

utio

nal p

olic

ies

enac

ted

in re

cent

yea

rs w

ith th

e ob

ject

ive

of s

treng

then

ing

soci

al in

clus

ion,

pro

mot

e so

cial

mob

ility

and

redu

ce p

over

ty w

hile

pro

vidi

ng th

e co

nditi

ons

for t

he e

cono

my

to re

cove

r fro

m th

e im

pact

of C

ovid

-19

and

crea

ting

empl

oym

ent w

ithin

the

fram

e wor

k of

incl

usiv

e ec

onom

ic g

row

th, w

hils

t fac

ilitat

ing

the

twin

Gre

en

and

Dig

ital t

rans

ition

s.

The

Budg

et fo

r 202

2 w

ill co

ntin

ue to

enh

ance

the

disp

osab

le in

com

e of

low

and

mid

dle-

inco

me

earn

ers

and

ince

ntiv

ise

peop

le

to w

ork

by e

xten

ding

and

incr

easi

ng m

easu

res

whi

ch a

re a

imed

at m

akin

g w

ork

pay.

Suc

h m

easu

res

incl

ude

the

In-W

ork

Bene

fit

Sche

me,

the

tape

r of b

enef

its a

nd th

e re

duct

ion

of ta

x bu

rden

on

wor

kers

, thr

ough

tax

reba

tes

and

low

er ta

x on

par

t-tim

e an

d ov

ertim

e w

ork.

Fre

e ch

ildca

re s

ervi

ces

will

be e

xten

ded

to e

veni

ngs

and

wee

kend

s fo

r pe

ople

wor

king

shi

fts to

eas

e la

bour

su

pply

sho

rtage

s in

spe

cific

sec

tors

. Th

e 20

22 B

udge

t inc

lude

s a

num

ber o

f mea

sure

s ai

med

at f

inan

cial

ly e

nhan

cing

the

pens

ione

rs’ a

nd e

lder

ly’s

inco

me

and

also

su

ppor

ting

the

prov

isio

n of

info

rmal

long

-term

car

e. M

ost p

ensi

ons,

bot

h co

ntrib

utor

y an

d no

n-co

ntrib

utor

y pe

nsio

n w

ill in

crea

se

in e

xces

s of

the

cust

omar

y co

st o

f liv

ing

adju

stm

ent.

The

taxa

ble

ceilin

g on

pen

sion

s w

as a

lso

rais

ed. O

ther

mea

sure

s w

ere

intro

duce

d to

stre

ngth

the

supp

ort t

o ho

useh

olds

that

hire

priv

ate

help

at h

ome.


stre

ngth

enin

g th

e co

vera

ge, a

dequ

acy,

an

d su

stai

nabi

lity

of

heal

th a

nd s

ocia

l pr

otec

tion

syst

ems

for

all.

By m

eans

of t

he fo

rthco

min

g ye

ar’s

Bud

get,

the

Gov

ernm

ent w

ill co

ntin

ue to

sup

port

inco

mes

thro

ugh

inco

me

supp

lem

ents

and

bo

nuse

s lin

ked

to c

hild

birth

or a

dopt

ion,

with

a s

peci

fic fo

cus

on lo

w-in

com

e ho

useh

olds

. The

Gov

ernm

ent w

ill al

so b

e in

crea

sing

th

e st

ipen

d al

low

ance

pro

vide

d to

stu

dent

s by

10

per c

ent.

Seve

ral p

olic

y m

easu

res

whi

ch h

ad b

een

put i

n pl

ace

in p

revi

ous

year

s, in

tend

ed to

ens

ure

affo

rdab

le h

ousi

ng a

vaila

bilit

y, w

ere

exte

nded

and

wid

ened

in s

cope

, whi

le th

e te

mpo

rary

mea

sure

s in

trodu

ced

to s

uppo

rt th

e pr

oper

ty m

arke

t dur

ing

the

pand

emic

w

ere

not r

enew

ed.

Su

stai

nabl

e an

d gr

owth

-enh

anci

ng

inve

stm

ent,

nota

bly

supp

ortin

g th

e gr

een

and

digi

tal t

rans

ition

.

Follo

win

g th

e la

unch

of t

he G

reen

Lis

t mar

ket i

n 20

20, t

he M

alta

Sto

ck E

xcha

nge

cont

inue

s to

pro

mot

e gr

een

bond

s w

hile

als

o co

ntrib

utin

g to

the

disc

ussi

ons

at n

atio

nal a

nd r

egul

ator

y le

vel a

roun

d su

stai

nabl

e fin

ance

. The

Mal

ta S

tock

Exc

hang

e al

so

mai

ntai

ns a

fee

stru

ctur

e ad

opte

d in

202

0 th

at p

rom

otes

gre

en b

onds

thro

ugh

the

prov

isio

n of

red

uced

fees

tha

t wer

e al

so

impl

emen

ted

for i

ssue

rs a

nd in

vest

ors.

As

par

t of t

he M

FSA

Cor

pora

te G

over

nanc

e C

ode,

the

Auth

ority

will

be p

ropo

sing

a P

rinci

ple

embe

ddin

g bo

th C

orpo

rate

Soc

ial

Res

pons

ibilit

y (‘C

SR’)

and

Envi

ronm

ent S

ocia

l Gov

erna

nce

(‘ESG

’) as

pect

s. T

he a

im o

f thi

s is

to e

ncou

rage

ent

ity’s

boa

rds

to

ende

avou

r to

embr

ace

ESG

and

CSR

prin

cipl

es in

the

entit

y’s

stra

tegy

, lea

ding

to a

n en

hanc

ed fo

cus

on s

usta

inab

le fi

nanc

e ac

tiviti

es a

nd p

roje

cts

and

long

-term

val

ue c

reat

ion

for a

ll st

akeh

olde

rs.

Al

so, t

he M

FSA

is e

xpec

ted

to a

ddre

ss p

rude

ntia

l and

fina

ncia

l sta

bilit

y ris

ks a

ssoc

iate

d w

ith c

limat

e ch

ange

, con

duct

risk

s in

en

surin

g th

at th

e rig

ht in

form

atio

n is

pro

vide

d to

clie

nts

and

ensu

ring

that

the

finan

cial

sec

tor p

lays

an

effe

ctiv

e ro

le in

del

iver

ing

sust

aina

ble

finan

ce a

s pa

rt of

the

wid

er e

cono

my

in a

chie

ving

sus

tain

able

goa

ls.

In t

his

resp

ect,

the

setu

p of

an

inte

rnal

Su

stai

nabl

e Fi

nanc

e W

orki

ng G

roup

(‘SF

WG

’) ov

er th

e pa

st m

onth

s ha

s he

lped

to a

ddre

ss th

e im

med

iate

impl

emen

tatio

n ne

eds

in th

e Su

stai

nabl

e Fi

nanc

e re

gula

tory

app

roac

h. T

he A

utho

rity

has

rece

ntly

reso

lved

to e

stab

lish

a Su

stai

nabl

e Fi

nanc

e of

fice

– w

ith th

e ai

m o

f sup

plem

entin

g th

e w

ork

of th

e SF

WG

, enh

anci

ng fu

rther

the

tech

nica

l exp

ertis

e in

this

key

are

a, a

s w

ell a

s im

plem

entin

g M

FSA’

s st

rate

gy fo

r the

inte

grat

ion

of s

usta

inab

le fi

nanc

e re

gula

tion

acro

ss th

e Au

thor

ity a

nd th

e in

dust

ry.

In

add

ition

, the

Bud

get f

or 2

022

anno

unce

d th

e la

unch

of a

n in

itiat

ive

whe

reby

Mal

tese

ent

erpr

ises

sha

ll be

assi

sted

in e

valu

atin

g th

e ES

G im

pact

of i

nves

tmen

t pro

ject

s w

hils

t als

o pr

ovid

ing

an in

cent

ive

to in

tegr

ate

the

ESG

crit

eria

in th

eir i

nves

tmen

t pla

ns.

The

RR

P pl

an s

ets

out i

nves

tmen

ts th

at w

ill co

ntrib

ute

tow

ards

the

gree

n tr

ansi

tion,

thro

ugh

reno

vatio

n, g

reen

ing

and

deep

re

trofit

ting

of p

ublic

and

priv

ates

sec

tor b

uild

ings

. It i

nclu

des

the

cons

truct

ion

of a

nea

r-ca

rbon

-neu

tral s

choo

l to

serv

e as

a m

odel

fo

r the

futu

re. T

he G

over

nmen

t will

also

be

inve

stin

g in

two

proj

ects

rela

ted

to th

e st

orag

e of

rene

wab

le e

nerg

y, w

hils

t con

tinui

ng

to in

vest

ing

in P

V pa

nels

on

its b

uild

ings

. R

enew

able

ene

rgy

inve

stm

ents

in f

ootp

aths

, ro

ads

and

publ

ic s

pace

s w

ill al

so

cont

ribut

e to

war

ds t

he g

reen

tra

nsiti

on.

The

Gov

ernm

ent

is c

omm

itted

to

redu

ce t

he n

atio

nal G

HG

em

issi

ons

and

to m

ove

tow

ards

a c

lean

er,

and

mor

e su

stai

nabl

e m

obilit

y, w

ith g

rant

sch

emes

to

enha

nce

the

upta

ke o

f ne

w e

lect

ric v

ehic

les,

in

vest

men

ts to

pro

mot

e al

tern

ativ

e m

odes

of t

rans

port

and

inve

stm

ents

to d

ecar

boni

se th

e pu

blic

ser

vice

flee

t. A

sche

me

to

enco

urag

e th

e in

stal

latio

n of

PVs

on

vehi

cles

will

also

be

laun

ched

. Fur

ther

mor

e, a

ll M

alte

se c

itize

ns w

ill be

pro

vide

d w

ith fr

ee

acce

ss to

sch

edul

ed ro

ad p

ublic

tran

spor

t ser

vice

s, in

ord

er to

enc

oura

ge c

olle

ctiv

e an

d m

ulti-

mod

al tr

ansp

ort.

In

add

ition

, Mal

ta is

aim

ing

to p

rom

ote

the

intro

duct

ion

of g

reen

infra

stru

ctur

e by

pro

vidi

ng a

fina

ncia

l inc

entiv

e in

the

form

of a

gr

ant s

chem

e w

ith a

n al

loca

ted

budg

et o

f €2

milli

on. I

nfra

stru

ctur

e su

ch a

s gr

een

faca

des,

gre

en w

alls

and

the

retro

fittin

g of

fron

t ga

rden

s in

priv

ate

prop

ertie

s, lo

cate

d ou

tsid

e U

rban

Con

serv

atio

n Ar

eas

or v

illa/b

unga

low

site

s w

ithin

Res

iden

tial P

riorit

y A

reas

, w

ill be

elig

ible

. The

re a

re a

lso

plan

s to

ext

end

such

sch

eme

to c

over

rest

orat

ion,

mai

nten

ance

and

reus

e of

her

itage

bui

ldin

gs

with

in a

ll U

rban

Con

serv

atio

n Ar

eas

(UC

A) in

Mal

ta a

nd G

ozo.

Oth

er s

chem

es, w

hich

incl

ude

finan

cial

ass

ista

nce,

for a

num

ber

of p

ropo

sals

incl

ude

phys

ical

inte

rven

tions

on

publ

ic s

pace

s an

d pr

oper

ties

in u

rban

are

as w

hich

are

inte

nded

to s

uppo

rt ac

tiviti

es

whi

ch b

enef

it th

e w

ider

com

mun

ities

. Th

e m

ain

bene

ficia

ries

of t

hese

sch

emes

are

Loc

al C

ounc

ils a

nd n

on-g

over

nmen

tal

orga

nisa

tions

. Apa

rt fro

m th

e de

velo

pmen

t of v

ario

us g

reen

are

as, i

n th

e Bu

dget

202

2 a

num

ber o

f sch

emes

and

initi

ativ

es w

ere

also

lau

nche

d in

ord

er t

o en

cour

ages

bus

ines

ses

to i

nves

t in

sus

tain

able

pro

ject

s an

d in

clud

e en

viro

nmen

tal,

soci

al a

nd

gove

rnan

ce (E

SG) c

riter

ia in

thei

r inv

estm

ent d

ecis

ions

.


As p

art o

f the

gre

en tr

ansi

tion

and

to m

eet t

he fo

reca

sted

incr

ease

in th

e is

land

's e

lect

ricity

dem

and

beca

use

of e

cono

mic

gro

wth

an

d th

e el

ectri

ficat

ion

of ro

ad tr

ansp

ort,

a se

cond

ele

ctric

al in

terc

onne

ctio

n be

twee

n M

alta

and

Sic

ily is

pla

nned

, so

as to

incr

ease

th

e el

ectri

city

inte

rcon

nect

ivity

with

the

Euro

pean

ele

ctric

ity n

etw

ork.

Mor

eove

r, M

alta

sha

ll co

nduc

t fur

ther

stu

dies

on

the

Mel

ita

Tran

sGas

Pip

elin

e (M

TGP)

Pro

ject

of C

omm

on In

tere

st (P

CI 5

.19)

dur

ing

the

perio

d N

ovem

ber 2

021-

Dec

embe

r 202

2 so

as

to

rede

sign

the

pipe

line

infra

stru

ctur

e in

ord

er to

als

o al

low

hyd

roge

n tra

nspo

rtatio

n.

Sche

mes

to a

ddre

ss th

e ef

ficie

nt p

rodu

ctio

n an

d us

e of

ene

rgy,

aim

ing

at r

educ

ing

the

com

mer

cial

use

of f

ossi

l-fue

l-bas

ed

ener

gy, c

ontin

ued

to b

e av

aila

ble

to e

nter

pris

es. T

he ‘P

rom

otio

n of

Ene

rgy

Audi

ts in

Sm

all a

nd M

ediu

m E

nter

pris

es’ e

ncou

rage

s SM

Es t

o ca

rry o

ut a

n en

ergy

aud

it in

ord

er t

o id

entif

y ac

tions

with

in t

he e

nter

pris

e’s

oper

atio

n th

at c

an l

ead

to e

nerg

y im

prov

emen

t. M

alta

Ent

erpr

ise

supp

orts

und

erta

king

s in

car

ryin

g ou

t inv

estm

ents

lead

ing

to im

prov

ed e

nerg

y ef

ficie

ncy

thro

ugh

vario

us s

chem

es s

uch

as th

e ‘In

vest

men

t Aid

for

Ene

rgy

Effic

ienc

y Pr

ojec

ts’ a

nd t

he ‘L

eadi

ng s

port

orga

nisa

tions

to

high

er

ener

gy e

ffici

ency

’ sch

eme.

C

urre

ntly

in te

rms

of m

easu

res

rela

ted

to re

new

able

s th

ere

are

five

PV s

chem

es in

pla

ce to

pro

mot

e th

e us

e of

rene

wab

le e

nerg

y th

roug

h en

hanc

ed g

rant

s. T

he s

chem

es n

ow s

uppo

rt th

e us

e of

bat

tery

sto

rage

sys

tem

s, w

hich

will

ensu

re th

at t

he e

nerg

y ge

nera

ted

thro

ugh

the

PV p

anel

s du

ring

the

day,

can

be

stor

ed in

a b

atte

ry a

nd u

sed

late

r whe

n ne

eded

. The

PV

sche

mes

are

co

mpl

emen

ted

by th

e fe

ed-in

tarif

fs s

chem

e, w

hich

furth

er e

ncou

rage

s th

e us

e of

rene

wab

le e

nerg

y. D

urin

g 20

20, a

PV

sche

me

for

Volu

ntar

y O

rgan

isat

ions

fun

ded

thro

ugh

natio

nal

fund

s w

as a

lso

laun

ched

to

enco

urag

e th

e us

e of

ren

ewab

le e

nerg

y eq

uipm

ent

on t

heir

prem

ises

. Ad

ditio

nally

, th

e G

over

nmen

t is

als

o pr

ovid

ing

supp

ort

sche

mes

for

med

ium

and

larg

e-sc

ale

rene

wab

le e

nerg

y in

stal

latio

ns t

hrou

gh a

com

petit

ive

proc

ess,

whe

reby

inve

stor

s ar

e in

vite

d to

bid

for

sup

port.

Allo

catio

n of

ca

paci

ty is

bas

ed o

n th

e bi

d pr

ice.

Dur

ing

2021

, a n

ew in

vest

men

t opp

ortu

nity

has

bee

n la

unch

ed fo

r pro

spec

tive

bidd

ers,

with

bi

ds a

re c

urre

ntly

bei

ng re

ceiv

ed.

Oth

er s

chem

es e

ncou

ragi

ng th

e re

duct

ion

of c

onsu

mpt

ion

of e

nerg

y in

clud

e th

e R

oof I

nsul

atio

n an

d D

oubl

e-G

lazi

ng s

chem

e,

the

sche

mes

rela

ted

to s

olar

wat

er h

eate

rs a

nd h

eat p

umps

and

the

Dom

estic

Cis

tern

Res

tora

tion

Sche

me,

whi

ch e

ncou

rage

s th

e ha

rves

ting

and

use

of ra

inw

ater

in th

e do

mes

tic s

ecto

r by

cove

ring

cost

s re

late

d to

the

repa

irs o

f cis

tern

s an

d in

stal

latio

n of

se

cond

-cla

ss w

ater

sys

tem

s. T

he G

over

nmen

t has

als

o re

new

ed th

e sc

hem

e fo

r the

pur

chas

e or

upg

radi

ng o

f one

’s r

ever

se

osm

osis

. Th

e G

over

nmen

t’s e

ffort

to g

reen

ing

of th

e to

uris

m in

dust

ry th

roug

h aw

ards

and

thro

ugh

the

oper

atio

n of

the

Eco‑

certi

ficat

ion

sche

me.

Gov

ernm

ent

is a

lso

emba

rkin

g on

a ‘

Tow

ard

Net

-Zer

o To

uris

m A

ccom

mod

atio

n’ p

roje

ct,

whi

ch w

ill re

sult

in t

he

deve

lopm

ent o

f a lo

ng-te

rm p

lan

aim

ed a

t the

dec

arbo

nisa

tion

of th

e to

uris

m s

ecto

r. It

aim

s to

inje

ct a

nd le

vera

ge s

ubst

antia

l in

vest

men

t in

the

tour

ism

acc

omm

odat

ion

sect

or to

mov

e to

net

zer

o op

erat

ions

whi

le d

evel

opin

g ne

w te

chno

logi

cal in

frast

ruct

ure

for t

he G

over

nmen

t to

obta

in d

ata

on th

e co

nsum

ptio

n in

this

sec

tor.

An

initi

ativ

e im

plem

ente

d by

the

Mar

ket S

urve

illanc

e D

irect

orat

e (M

SD)

with

in t

he M

alta

Com

petit

ion

and

Con

sum

er A

ffairs

Au

thor

ity (M

CC

AA) i

nclu

des

the

parti

cipa

tion

in a

n EU

fund

ed s

urve

illanc

e pr

ojec

t to

addr

ess

Eco

Labe

lling

and

Eco

Des

ign,

w

hich

sup

ports

the

impr

oved

ene

rgy

effic

ienc

y of

hou

seho

ld a

nd p

rofe

ssio

nal r

efrig

erat

ion.

Thr

ough

coo

pera

tion

with

oth

er E

U

Mem

ber S

tate

s, th

e pr

ojec

t has

gen

erat

ed s

igni

fican

t ben

efits

for b

oth

the

envi

ronm

ent a

nd th

e co

nsum

ers.

Joi

nt a

ctio

ns ta

ken

as p

art o

f thi

s pr

ojec

t res

ulte

d in

the

estim

ated

sav

ing

of p

rimar

y en

ergy

loss

of 8

0 G

Wh

per y

ear f

or th

e pe

riod

2020

-203

0, w

hich

tra

nsla

tes

into

sub

stan

tial e

nerg

y-re

late

d co

st s

avin

gs.

The

Nat

iona

l Was

te M

anag

emen

t Pl

an (

WM

P) 2

021-

2030

, w

hich

is d

ue t

o be

ado

pted

sho

rtly,

com

pris

es o

f M

alta

’s p

olic

y m

easu

res

to m

ove

tow

ards

mee

ting

its 2

030

oblig

atio

ns w

hen

it co

mes

to re

cycl

ing

and

dive

rsio

n of

was

te fr

om la

ndfil

ls, a

s w

ell

as s

uppo

rting

the

trans

ition

to a

mor

e ci

rcul

ar a

nd re

sour

ce-e

ffici

ent e

cono

my.

The

Was

te to

Ene

rgy

inci

nera

tor p

lant

, tog

ethe

r w

ith t

he o

ther

inv

estm

ents

for

min

g pa

rt of

the

Eco

Hiv

e in

itiat

ive,

will

ens

ure

a be

tter

man

agem

ent

of w

aste

in

Mal

ta.

In

colla

bora

tion

with

loca

l cou

ncils

, the

Gov

ernm

ent w

ill al

so b

e pr

ovid

ing

smar

t bin

s fo

r bus

ines

ses

to e

ncou

rage

furth

er re

cycl

ing.


The

Gov

ernm

ent h

as a

lso

laun

ched

the

“Reu

se C

entre

s” a

nd w

ill so

on b

e la

unch

ing

the

“Rep

air C

entre

”, w

ith th

e ai

m to

furth

er

leng

then

the

life

time

of p

rodu

cts.

The

Stra

tegy

on

Sing

le-U

se P

last

ics

(SU

P) w

hich

aim

s to

ens

ure

the

prot

ectio

n of

the

en

viro

nmen

t and

hum

an h

ealth

from

pla

stic

pol

lutio

n, b

y re

duci

ng th

e co

nsum

ptio

n of

sin

gle-

use

plas

tic p

rodu

cts

and

incr

easi

ng

the

qual

ity a

nd q

uant

ities

of s

ingl

e-us

e pl

astic

was

te c

olle

cted

for

recy

clin

g, is

bei

ng fi

nalis

ed fo

llow

ing

a pu

blic

con

sulta

tion

exer

cise

. C

onsc

ious

that

the

digi

talis

atio

n of

the

econ

omy

is in

stru

men

tal t

o en

hanc

e po

tent

ial g

row

th, t

he M

alte

se G

over

nmen

t pla

ns to

fa

cilit

ate

furth

er d

igita

lisat

ion

of s

ervi

ces

in p

ublic

adm

inis

tratio

n, a

s w

ell a

s su

ppor

ting

busi

ness

to in

vest

in d

igita

lisat

ion.

The

se

incl

ude

inve

stm

ent g

rant

s to

inte

nsify

the

digi

talis

atio

n of

the

priv

ate

sect

or. T

he p

lan

also

env

isag

es to

stre

ngth

en th

e re

silie

ncy,

se

curit

y an

d ef

ficie

ncy

of th

e G

over

nmen

t dig

ital i

nfra

stru

ctur

e, e

nabl

ing

the

Gov

ernm

ent t

o pr

ovid

e pr

oact

ive

actio

n, s

ecur

e se

rvic

es a

nd s

tream

lined

ope

ratio

ns to

citi

zens

and

the

busi

ness

sec

tor.

The

Gov

ernm

ent h

as a

lso

anno

unce

d in

vest

men

ts in

th

e di

gita

lizat

ion

of th

e M

erch

ant S

hipp

ing

Dire

ctor

ate

with

in T

rans

port

Mal

ta, t

hus

prov

idin

g a

mor

e ef

ficie

nt re

gula

tory

ser

vice

to

ope

rato

rs in

this

impo

rtant

eco

nom

ic a

ctiv

ity. F

urth

er d

igita

lizat

ion

and

mod

erni

satio

n of

the

publ

ic a

dmin

istra

tion

is p

lann

ed,

incl

udin

g pu

blic

and

intra

-faci

ng s

ervi

ces.

The

cont

inua

tion

of th

e di

gita

lisat

ion

of th

e la

w c

ourts

, int

ende

d to

impr

ove

the

effic

ienc

y an

d ef

ficac

y of

the

Mal

tese

just

ice

syst

em w

ill al

so b

e fin

ance

d th

roug

h th

e R

RP.

The

dev

elop

men

t of t

he fi

rst D

igita

l Jus

tice

Stra

tegy

for M

alta

will

act a

s a

blue

prin

t fo

r the

dig

ital i

nitia

tives

to b

e un

derta

ken

in th

e M

alte

se ju

stic

e se

ctor

and

furth

er p

rom

ote

the

syne

rgy

of th

e in

itiat

ives

acr

oss

all t

he re

leva

nt s

ecto

rs.

The

Mal

ta D

iġita

li St

rate

gy h

as b

een

draf

ted

follo

win

g nu

mer

ous

inte

r-Min

iste

rial c

onsu

ltatio

ns. T

he S

trate

gy is

in th

e fin

al p

hase

is

exp

ecte

d to

be

laun

ched

by

end

of 2

021.

Vario

us d

igita

lisat

ion

initi

ativ

es h

ave

been

und

erta

ken

in t

he r

ecen

t ye

ars.

The

se i

nclu

de t

he d

igiti

sing

of

the

FIAU

’s c

ore

com

mun

icat

ion

tool

s, d

igita

lisat

ion

of th

e Sk

ills re

gist

er, a

s w

ell a

s th

e au

tom

atio

n of

dat

a co

llect

ion

proc

esse

s an

d da

ta q

ualit

y at

the

Nat

iona

l Sta

tistic

s of

fice.

The

Agr

icul

tura

l Res

earc

h an

d In

nova

tion

Hub

(AG

RIH

UB)

was

als

o la

unch

and

will

be s

uppo

rting

in

nova

tive

agric

ultu

re a

pplic

ativ

e re

sear

ch a

nd im

plem

ent p

ilot p

roje

cts

usin

g th

e la

test

tech

nolo

gy to

pro

vide

sup

port

to fa

rmer

s to

hel

p w

ith t

heir

deci

sion

. Fu

rther

mor

e, a

s pa

rt of

the

Pitk

alija

cen

tral v

eget

able

mar

ket

refo

rm,

a ne

w I

T sy

stem

is b

eing

im

plem

ente

d w

hich

will

lead

to re

duce

d fo

od w

asta

ge b

y pr

oces

sing

food

alo

ng w

ith h

elpi

ng p

eopl

e in

nee

d w

ith fo

od w

hich

is

not s

old

durin

g m

arke

t day

s.

Wor

k is

und

erw

ay o

n th

e de

velo

pmen

t of

the

Nat

iona

l R&

I St

rate

gic

Plan

pos

t-202

0 an

d th

e pr

epar

atio

n of

the

Sm

art

Spec

ialis

atio

n St

rate

gy (R

IS3)

202

1-20

27.

With

rega

rd to

Hor

izon

202

0, b

y Se

ptem

ber 2

021,

250

Mal

tese

ent

ities

par

ticip

ated

/or w

ere

parti

cipa

ting

in a

tota

l of 1

86 p

roje

cts

and

rece

ived

€36

,715

,580

milli

on in

EU

net

fund

ing

with

par

ticip

ants

rang

ing

from

hig

her e

duca

tion,

pub

lic a

nd p

rivat

e as

wel

l as

non

-pro

fit r

esea

rch

orga

nisa

tions

. Oth

er in

vest

men

t pro

ject

s to

impr

ove

R&I

in M

alta

hav

e al

so b

een

impl

emen

ted

by th

e M

CST

.

Mor

eove

r, th

e In

tern

atio

nalis

atio

n an

d Pa

rtner

ship

Aw

ard

Sche

me

(IPAS

+) is

a s

chem

e de

dica

ted

to f

orm

ing

inte

rnat

iona

l co

llabo

ratio

ns, w

ith 8

7 pr

ojec

ts h

avin

g be

en a

war

ded.

Fur

ther

to th

e ab

ove

and

in r

espo

nse

to th

e C

OVI

D-1

9 pa

ndem

ic, t

he

CO

VID

-19

R&D

fund

was

issu

ed in

202

0 to

fund

pro

ject

s th

at c

ould

pro

vide

inno

vativ

e so

lutio

ns to

the

pand

emic

. Thi

s w

as a

co

mbi

ned

effo

rt be

twee

n th

e M

CST

and

Mal

ta E

nter

pris

e. 3

6 ap

plic

atio

ns w

ere

rece

ived

, with

4 b

eing

aw

arde

d, to

tallin

g €3

.54

milli

on in

gra

nt fu

ndin

g.

MC

ST ru

ns a

nnua

l bila

tera

l and

mul

tilat

eral

inte

rnat

iona

l fun

ding

pro

gram

mes

that

sup

port

the

inte

rnat

iona

lisat

ion

of R

&I.

The

PRIM

A pr

ogra

mm

e (P

artn

ersh

ip fo

r Res

earc

h an

d In

nova

tion

in th

e M

edite

rrane

an A

rea)

, sup

ports

tran

snat

iona

l R&I

pro

ject

s in

th

e fie

lds

of a

gric

ultu

re, f

ood

and

wat

er m

anag

emen

t. Fu

rther

mor

e, a

new

join

t ini

tiativ

e, th

e M

CST

-TÜ

BITA

K Jo

int C

all f

or R

&I

Prop

osal

s, w

as la

unch

ed in

Q1

2021

to fu

nd R

&I p

roje

cts

that

are

join

tly u

nder

take

n by

Mal

tese

and

Tur

kish

ent

ities

. MC

ST p

ut


forw

ard

a ca

ll bu

dget

of €

200,

000

to s

uppo

rt 2

bila

tera

l pro

ject

s th

at s

hall

prov

ide

inno

vativ

e so

lutio

ns fo

r wat

er m

anag

emen

t an

d th

e ag

ricul

ture

and

food

sec

tors

. Cal

l out

com

es s

hall

be m

ade

avai

labl

e in

Q4

2021

.

Furth

erm

ore,

SIN

O-M

ALTA

Fun

d, w

hich

is a

col

labo

ratio

n be

twee

n M

CST

and

the

Min

istry

of S

cien

ce a

nd T

echn

olog

y of

the

Peop

le’s

Rep

ublic

of C

hina

(M

OST

) ai

ms

to s

uppo

rt bi

late

ral R

&I in

sev

eral

them

atic

are

as in

clud

ing

aqua

cultu

re, t

rans

port,

di

gita

l tec

hnol

ogie

s as

wel

l as

inno

vatio

ns in

hea

lth a

nd g

reen

tran

sitio

ns. F

or 2

021,

MC

ST la

unch

ed it

s an

nual

cal

l in

Q2

2021

, w

ith a

nat

iona

l bud

get o

f €60

0,00

0. T

he o

utco

mes

of t

he c

all s

hall

be m

ade

avai

labl

e by

end

202

1.

MC

ST is

als

o en

gage

d in

the

prep

arat

ory

proc

esse

s fo

r the

eve

ntua

l par

ticip

atio

n in

thre

e of

the

prop

osed

Eur

opea

n Pa

rtner

ship

s un

der

Hor

izon

Eur

ope

(202

1-20

27).

Eur

opea

n Pa

rtner

ship

s w

ill br

ing

toge

ther

priv

ate

and

publ

ic p

artn

ers

toge

ther

with

the

Euro

pean

Com

mis

sion

, to

addr

ess

som

e of

Eur

ope’

s m

ost p

ress

ing

chal

leng

es th

roug

h re

sear

ch a

nd in

nova

tion.

Par

ticip

atio

n is

bei

ng fo

rese

en in

the

Cle

an E

nerg

y Tr

ansi

tion

Partn

ersh

ip, t

he S

usta

inab

le B

lue

Econ

omy

Partn

ersh

ip a

nd th

e Tr

ansf

orm

ing

Hea

lth a

nd C

are

Syst

ems

Partn

ersh

ip w

ith a

n av

aila

ble

natio

nal b

udge

t of €

10.5

milli

on o

ver t

he li

fetim

e of

thes

e Pa

rtner

ship

s.

Mal

ta is

als

o re

cogn

isin

g th

e en

ablin

g ro

le o

f Res

earc

h an

d In

nova

tion

(R&I

) in

prov

idin

g m

uch-

need

ed in

nova

tive

and

gree

n po

licie

s, s

ervi

ces

and

prod

ucts

, thu

s pu

shin

g fo

rwar

d th

e gr

een

trans

ition

in th

e se

ctor

s of

ene

rgy

and

wat

er w

hich

face

cou

ntry

-sp

ecifi

c ch

alle

nges

, exa

cerb

ated

by

popu

latio

n gr

owth

and

clim

ate

chan

ge. F

or th

is re

ason

, a N

atio

nal S

trate

gy fo

r R&I

in E

nerg

y an

d W

ater

(20

21-2

030)

was

dev

elop

ed b

y th

e En

ergy

and

Wat

er A

genc

y, u

nder

the

Min

istry

for

Ene

rgy,

Ent

erpr

ise

and

Sust

aina

ble

Dev

elop

men

t, to

pro

vide

a s

uppo

rt fra

mew

ork

with

the

aim

of

finan

cing

R&I

pro

ject

s th

at a

re t

ailo

red

to lo

cal

spec

ifici

ties

and

natio

nal p

riorit

ies.

In th

is re

gard

, at t

he s

tart

of 2

021,

five

pro

ject

s le

d by

loca

l res

earc

hers

and

indu

strie

s w

ere

awar

ded

a re

sear

ch g

rant

follo

win

g a

com

petit

ive

Cal

l for

Pro

posa

ls in

202

0.

The

seco

nd c

all f

or p

roje

cts

unde

r the

Sup

port

Sche

me

for R

&I P

roje

cts

in th

e fie

ld o

f ene

rgy

was

laun

ched

in M

arch

202

1 an

d ap

plic

atio

ns a

re u

nder

revi

ew.

The

Go

to M

arke

t pr

ogra

mm

e, a

imin

g at

add

ress

ing

adva

nced

tech

nolo

gy w

ill al

so b

e la

unch

ed. T

hrou

gh th

e H

oriz

on S

uppo

rt M

easu

res

sche

me,

th

e G

over

nmen

t will

also

enc

oura

ge th

e fu

rther

upt

ake

of th

is fu

nd b

y lo

cal e

ntiti

es a

nd re

sear

cher

s.

Follo

win

g th

e la

unch

of t

he N

atio

nal A

I Stra

tegy

, whi

ch re

ceiv

ed h

uge

inte

rest

bot

h lo

cally

and

inte

rnat

iona

lly, t

he M

alta

Dig

ital

Inno

vatio

n Au

thor

ity (

MD

IA)

publ

ishe

d fo

r co

nsul

tatio

n th

e AI

Inn

ovat

ive

Tech

nolo

gy A

rrang

emen

ts (

ITA)

Gui

delin

es,

the

AI

Syst

em A

udito

r C

ontro

l O

bjec

tives

, th

e AI

ITA

Nom

encl

atur

e an

d th

e AI

ITA

Blu

eprin

t G

uide

lines

. Th

e si

x pi

lot

proj

ects

es

tabl

ishe

d in

Mal

ta’s

Nat

iona

l AI S

trate

gy h

ave

been

initi

ated

with

the

resp

ectiv

e en

titie

s, o

f whi

ch th

e m

ajor

ity a

re in

an

ongo

ing

stag

e. T

hrou

gh A

rtific

ial I

ntel

ligen

ce, t

hese

pilo

t pro

ject

s ai

m to

enh

ance

var

ious

sec

tions

at d

iffer

ent l

evel

s w

ithin

the

publ

ic

sect

or in

Mal

ta.

Stre

ngth

enin

g th

e co

vera

ge, a

dequ

acy,

an

d su

stai

nabi

lity

of

heal

th a

nd s

ocia

l pr

otec

tion

syst

ems

A sh

arp

rise

in h

ealth

exp

endi

ture

was

inev

itabl

e du

ring

2020

due

to th

e C

OVI

D-1

9 pa

ndem

ic. T

he in

itial

pol

icy

resp

onse

sou

ght

to lo

wer

the

num

ber o

f inf

ectio

ns, t

o av

oid

an o

verlo

adin

g of

the

acut

e he

alth

care

sys

tem

and

to li

mit

the

num

ber o

f cas

ualty

ad

mis

sion

s. In

add

ition

, fur

ther

hea

lthca

re fu

ndin

g w

as n

eces

sary

to a

ddre

ss h

ospi

tal c

apac

ity, p

rocu

re m

edic

al e

quip

men

t and

pr

otec

tive

clot

hing

. As

the

impa

ct o

f the

CO

VID

-19

pand

emic

is g

radu

ally

bec

omin

g m

ore

man

agea

ble,

fisc

al s

usta

inab

ility

chal

leng

es in

the

natio

nal h

ealth

sys

tem

per

sist

.

The

heal

th s

yste

m r

emai

ns in

crea

sing

ly c

halle

nged

by

an a

gein

g po

pula

tion,

a fa

st-g

row

ing

expa

t pop

ulat

ion,

ris

ing

cost

of

med

icin

es, a

s w

ell a

s in

crea

sing

ly in

nova

tive

and

expe

nsiv

e ne

w d

rugs

. Acc

ess

to e

xpen

sive

med

icin

es is

par

ticul

arly

lim

ited

for

Mal

ta, w

here

the

rela

tivel

y sm

all q

uant

ities

requ

ired

put M

alta

at a

dis

adva

ntag

e w

hen

it co

mes

to p

rice

nego

tiatio

ns. T

his,

as

wel

l as

redu

cing

the

pric

e in

equa

lity,

is h

igh

on th

e ag

enda

of t

he V

alle

tta T

echn

ical

Com

mitt

ee.

The

Gov

ernm

ent

Form

ular

y Li

st h

as b

een

exte

nded

to

incl

ude

med

icin

es f

or c

ance

r, os

teop

oros

is,

fibro

mya

lgia

, ci

rcul

ator

y co

nditi

ons,

infla

mm

ator

y co

nditi

ons,

rare

dis

ease

s, IV

F pa

tient

s an

d ce

rtain

rare

and

ext

rem

e al

lerg

ies.


An in

tegr

al p

art o

f the

Gov

ernm

ent’s

pla

ns to

add

ress

a s

usta

inab

le h

ealth

care

sys

tem

is th

e in

vest

men

t in

prim

ary

care

, bot

h in

te

rms

of t

he h

ealth

wor

kfor

ce (

espe

cial

ly i

n te

rtiar

y he

alth

care

lev

el),

with

a f

ocus

on

spec

ialis

ed c

linic

s, a

nd a

lso

new

in

frast

ruct

ure.

The

HR

Dire

ctor

ate

with

in th

e M

inis

try fo

r Hea

lth is

wor

king

with

the

Wor

ld H

ealth

Org

anis

atio

n to

dra

w u

p a

Hea

lth

Wor

kfor

ce p

lan,

whi

ch w

ill gu

ide

capa

city

bui

ldin

g ov

er th

e co

min

g ye

ars.

The

recr

uitm

ent o

f spe

cial

ists

in p

rimar

y ca

re h

as b

een

ongo

ing,

in li

ne w

ith G

over

nmen

t’s p

lan

to s

hift

from

out

patie

nts

to p

rimar

y ca

re. T

he h

ealth

care

wor

kfor

ce in

prim

ary

care

has

pl

ayed

, and

con

tinue

s to

pla

y, a

n in

stru

men

tal r

ole

in th

e m

anag

emen

t of t

he C

OVI

D-1

9 pa

ndem

ic –

bot

h in

term

s of

car

e an

d fo

llow

-up

of C

OVI

D-1

9 pa

tient

s, a

s w

ell a

s in

the

vacc

inat

ion

cam

paig

n.

The

CO

VID

pan

dem

ic h

as c

reat

ed u

npre

cede

nted

cha

lleng

es fo

r the

nat

iona

l hea

lth s

yste

m. W

hils

t the

CO

VID

-rela

ted

cost

s in

curre

d by

the

heal

th s

yste

m h

ave

been

ext

ensi

ve, i

nves

ting

in w

ides

prea

d av

aila

bilit

y of

test

ing

and

in p

ublic

hea

lth s

ervi

ces,

ha

s he

lped

Mal

ta a

void

a s

ituat

ion

whe

rein

the

hosp

ital w

ould

not

hav

e co

ped

with

the

surg

e in

sev

ere

case

s re

quiri

ng c

are.

As p

art o

f its

pan

dem

ic m

anag

emen

t stra

tegy

, Mal

ta p

riorit

ised

the

cont

inui

ty o

f its

pre

vent

ive,

ele

ctiv

e an

d em

erge

ncy

heal

th

serv

ices

. In

fact

, the

sus

pens

ion

of e

lect

ive

heal

thca

re s

ervi

ces

was

lim

ited

to a

per

iod

of a

roun

d 6

wee

ks in

202

0.

CO

VID

-19

will

be le

avin

g lo

ng la

stin

g ef

fect

s on

pat

ient

s su

fferin

g fro

m c

hron

ic d

isea

ses

and

on m

enta

l hea

lth. D

espi

te th

e pa

ndem

ic m

anag

emen

t st

rate

gy d

escr

ibed

abo

ve,

chro

nic

dise

ase

suffe

rers

may

hav

e m

isse

d pr

even

tive

appo

intm

ents

at

outp

atie

nt o

r pr

imar

y ca

re d

ue t

o fe

ar o

f in

fect

ion,

the

reby

incr

easi

ng t

he r

isk

of m

ore

expe

nsiv

e co

mpl

icat

ions

. A

sim

ilar

phen

omen

on is

bei

ng o

bser

ved

in th

e ca

se o

f men

tal h

ealth

.

The

netw

ork

infra

stru

ctur

e at

MD

H, i

s cu

rrent

ly b

eing

upd

ated

in o

rder

to k

eep

abre

ast w

ith th

e ev

er-in

crea

sing

ICT

requ

irem

ents

. Fu

rther

mor

e, IC

T sy

stem

s w

ill be

enh

ance

d fu

rther

, thr

ough

the

refu

rbis

hmen

t of t

he e

-Hea

lth in

frast

ruct

ure

allo

win

g qu

icke

r ac

cess

and

resp

onse

to s

yste

ms,

via

mob

ile d

evic

es. U

pgra

ding

the

netw

ork

infra

stru

ctur

e, e

nsur

es th

at th

e ac

cess

and

inpu

t of

dat

a at

poi

nt o

f ca

re is

effe

ctiv

e in

rea

l tim

e, f

acilit

atin

g di

gita

l sys

tem

s us

e in

hea

lth in

form

atio

n sy

stem

s vi

ewab

le a

nd

acce

ssib

le to

citi

zens

on

Myh

ealth

sys

tem

.

In th

e co

min

g ye

ar th

e M

inis

try fo

r Hea

lth w

ill be

inve

stin

g in

the

full

depl

oym

ent a

nd u

tilis

atio

n of

the

Nat

iona

l Ele

ctro

nic

Hea

lth

Rec

ord

and

the

Elec

troni

c Pa

tient

Rec

ord,

in o

rder

to c

reat

e a

patie

nt-c

entri

c ec

osys

tem

whe

re d

ata

may

be

colla

ted,

cor

rela

ted,

an

d an

alys

ed in

a c

entra

l rep

osito

ry. A

mor

e ef

ficie

nt n

etw

ork

infra

stru

ctur

e is

like

ly to

faci

litat

e th

is fu

rther

.

This

will

faci

litat

e pr

edic

tive

and

prev

entiv

e re

porti

ng m

echa

nism

s, th

roug

h th

e us

e of

AI a

nd B

I sol

utio

ns, i

n th

e m

ediu

m- t

o lo

ng-

term

.

In k

eepi

ng w

ith a

n IT

-ass

iste

d he

alth

car

e de

liver

y, f

or t

he f

irst

time

with

in t

he n

atio

nal

heal

th c

are

syst

em,

the

Prim

ary

Hea

lthC

are

intro

duce

d a

natio

nwid

e Te

lem

edic

ine

24/7

Clie

nt S

uppo

rt Se

rvic

e. T

elem

edic

ine

serv

ices

util

ises

IT a

s a

soci

al

enab

ler,

to p

rovi

de ti

mel

y he

alth

car

e. T

he o

ngoi

ng C

OVI

D-1

9 pa

ndem

ic h

as h

ighl

ight

ed th

e us

eful

ness

of t

elem

edic

ine

serv

ices

in

pro

vidi

ng a

mea

ns to

con

nect

pat

ient

s to

thei

r hea

lth p

rofe

ssio

nals

, esp

ecia

lly in

cas

es w

hen

a co

nsul

tatio

n in

per

son

is n

ot

advi

sabl

e or

sim

ply

not p

ossi

ble.

The

rem

ote

patie

nt m

onito

ring

prog

ram

me

for T

ype

1 di

abet

ics

will

also

be

exte

nded

, to

cove

r all

thos

e ag

ed b

etw

een

17 a

nd

21.

Rec

ogni

sing

the

impo

rtanc

e of

suc

h a

serv

ice,

the

Prim

ary

Hea

lthC

are

was

pro

activ

e in

intro

duci

ng a

tele

med

icin

e se

rvic

e rig

ht

at th

e be

ginn

ing

of th

e pa

ndem

ic. T

he m

ultid

isci

plin

ary

Team

at t

his

Cen

tre g

ives

med

ical

adv

ice

to p

atie

nts;

pro

vide

reas

sura

nce

for

patie

nt s

ympt

omat

olog

y; a

ttend

clie

nts

on q

uara

ntin

e pr

otoc

ols;

gui

de p

atie

nts

to a

cces

s al

l ser

vice

s cu

rrent

ly a

vaila

ble

in

our c

omm

unity

; and

vet

dom

icilia

ry v

isits

by

liais

ing

with

the

Hea

lth C

entre

doc

tors

. Fro

m in

cept

ion

till d

ate,

the

Tele

med

icin

e C

lient

Sup

port

24/7

Cen

tre re

ceiv

ed a

roun

d 79

0,00

0 ca

lls fr

om c

lient

s an

d pa

tient

s re

quiri

ng th

e va

rious

ser

vice

s in

offe

r.


Ove

r rec

ent y

ears

, the

Gov

ernm

ent h

as in

trodu

ced

num

erou

s m

easu

res

inte

nded

to le

ngth

en th

e du

ratio

n of

wor

king

live

s. T

he

pens

ion

age

has

been

gra

dual

ly i

ncre

ased

and

will

reac

h 65

yea

rs b

y 20

27 w

hile

the

con

tribu

tory

per

iod

has

also

bee

n le

ngth

ened

from

30

year

s to

41

year

s. In

add

ition

, the

Gov

ernm

ent h

as a

lso

intro

duce

d st

ricte

r rul

es o

n th

e ac

cess

to th

e ‘e

arly

ex

it’ o

ptio

n by

cap

ping

the

num

ber o

f cre

dite

d co

ntrib

utio

ns fo

r per

sons

bor

n on

or a

fter 1

969.

Indi

vidu

als

beyo

nd th

e re

tirem

ent

age

who

cho

ose

to c

ontin

ue w

orki

ng c

an d

o so

with

out f

orfe

iting

thei

r pe

nsio

n w

hile

in e

mpl

oym

ent.

Ince

ntiv

es to

def

er e

arly

re

tirem

ent a

nd le

ngth

en w

orki

ng c

aree

rs w

ere

also

impl

emen

ted,

whe

reby

per

sons

who

are

elig

ible

for r

etire

men

t at t

he a

ge o

f 61

yea

rs, a

re a

war

ded

a fin

anci

al in

cent

ive

for e

ach

addi

tiona

l yea

r tha

t the

y ch

oose

to c

ontin

ue w

orki

ng u

p to

the

age

of 6

5 ye

ars.

Thi

s in

cent

ive

mec

hani

sm w

as in

itial

ly in

tend

ed fo

r priv

ate

sect

or e

mpl

oyee

s bu

t has

now

bee

n ex

tend

ed a

lso

to th

ose

in

the

publ

ic s

ecto

r. Pr

elim

inar

y an

alys

is u

sing

adm

inis

trativ

e da

ta h

as a

lread

y sh

own

that

this

mea

sure

has

bee

n ef

fect

ive

in

enco

urag

ing

defe

rred

retir

emen

t.

New

tax

para

met

ers

wer

e in

trodu

ced

for p

ensi

oner

s ov

er th

e ag

e of

61

year

s w

here

any

inco

me

from

pen

sion

up

to th

e m

axim

um

rate

of c

ontri

buto

ry p

ensi

on is

not

taxa

ble.

New

reb

ates

wer

e al

so in

trodu

ced

for

pens

ione

rs o

ver t

he a

ge o

f 61

year

s w

here

in

com

e is

der

ived

from

mor

e th

an o

ne p

ensi

on, w

hich

is o

ver t

he m

axim

um ra

te o

f the

con

tribu

tory

pen

sion

. The

re w

as a

lso

an

incr

ease

in c

ontri

buto

ry a

nd n

on-c

ontri

buto

ry p

ensi

ons

whi

ch is

ove

r and

abo

ve th

e ye

arly

cos

t of l

ivin

g ad

just

men

t inc

reas

e.

Labo

ur m

arke

t sta

tistic

s cl

early

sho

w th

e im

pact

of t

hese

refo

rms.

Inde

ed, t

he d

urat

ion

of w

orki

ng li

fe in

Mal

ta h

as in

crea

sed

by

6.6

year

s du

ring

the

perio

d 20

10 to

202

0 co

nfirm

ing

the

larg

est i

ncre

ase

in th

e EU

. As

a re

sult,

in 2

020

the

dura

tion

of w

orki

ng

life

in M

alta

exc

eede

d th

e EU

ave

rage

by

1.2

year

s. I

n ad

ditio

n, t

he e

mpl

oym

ent

rate

of

olde

r w

orke

rs (

55-6

4 ye

ars)

has

im

prov

ed, i

ncre

asin

g by

aro

und

21 p

erce

ntag

e po

ints

dur

ing

the

perio

d 20

10 to

202

0, th

e th

ird h

ighe

st in

crea

se in

Eur

ope.

The

se

deve

lopm

ents

mus

t als

o be

con

text

ualis

ed in

the

real

ity th

at s

pend

ing

on p

ensi

ons

in M

alta

rem

ains

bel

ow th

e EU

ave

rage

.

In a

dditi

on,

as o

utlin

ed in

the

RR

P, G

over

nmen

t in

tend

s to

pub

lish

an A

ctio

n Pl

an o

utlin

ing

prop

osal

s, in

clud

ing

legi

slat

ive

chan

ges

whe

re re

leva

nt, a

s a

follo

w-u

p to

the

Rep

ort o

f the

Pen

sion

s St

rate

gy G

roup

and

the

post

-con

sulta

tion

feed

back

.

The

Gov

ernm

ent’s

pol

icy

effo

rts h

ave

also

focu

sed

on d

iver

sify

ing

retir

emen

t inc

ome

and

redu

cing

the

sole

dep

ende

ncy

on

stat

e pe

nsio

ns.

Ove

r the

pas

t fou

r yea

rs, t

ax in

cent

ives

wer

e in

trodu

ced

for i

ndiv

idua

ls w

ho in

vest

in th

e Th

ird P

illar P

ensi

on S

chem

e an

d fo

r em

ploy

ers

who

offe

r the

ir em

ploy

ees

a Vo

lunt

ary

Occ

upat

iona

l pen

sion

sch

eme.

In th

e 20

20 a

nd 2

021

Budg

ets,

the

tax

bene

fits

for t

he T

hird

Pilla

r Pen

sion

Sch

eme

wer

e st

reng

then

ed. A

s a

resu

lt, th

ere

are

now

sev

eral

pro

vide

rs o

fferin

g pe

rson

al p

ensi

on

plan

s.

Thes

e ta

x cr

edits

wer

e al

so m

ade

avai

labl

e fo

r em

ploy

ers

impl

emen

ting

a vo

lunt

ary

occu

patio

nal p

ensi

ons

sche

me.

In 2

020,

the

tax

cred

it w

as in

crea

sed

from

15

per c

ent (

up to

a m

axim

um o

f €15

0) to

25

per c

ent (

up to

a m

axim

um o

f €50

0). I

n 20

21, t

he

max

imum

thre

shol

d w

as in

crea

sed

furth

er to

€75

0. B

y th

e en

d of

202

0, a

tota

l of 9

,387

taxp

ayer

s w

ere

enro

lled

in a

per

sona

l re

tirem

ent

sche

me

and

durin

g 20

20,

ther

e w

ere

1,04

5 em

ploy

ees

who

se c

ontri

butio

n to

a V

olun

tary

Occ

upat

iona

l Pen

sion

Sc

hem

e (V

OPS

) was

pai

d fo

r by

thei

r em

ploy

er w

hils

t 1,0

45 e

mpl

oyee

s co

ntrib

uted

to a

VO

PS.

In 2

019,

the

Gov

ernm

ent l

aunc

hed

the

Hom

e Eq

uity

Rel

ease

whi

ch is

a v

olun

tary

sch

eme

that

allo

ws

hom

e-ow

ner p

ensi

oner

s to

rais

e th

eir a

nnua

l fin

anci

al in

com

e an

d im

prov

e th

eir s

tand

ard

of li

ving

by

acce

ssin

g th

e eq

uity

tied

to th

eir h

ome.

Thi

s w

ill se

rve

as a

fina

ncia

l sup

plem

ent t

oget

her w

ith th

e pe

nsio

n th

ey re

ceiv

e, b

y al

low

ing

pens

ione

rs to

con

vert

a pa

rt of

thei

r res

iden

tial

valu

e in

to a

stre

am o

f inc

ome.

The

Mal

ta F

inan

cial

Ser

vice

s Au

thor

ity (M

FSA)

is c

urre

ntly

in th

e pr

oces

s of

eva

luat

ing

prop

osed

H

ome

Equi

ty R

elea

se p

rodu

cts.

The

Mal

ta S

tock

Exc

hang

e (M

SE) I

nstit

ute,

a s

ubsi

diar

y of

the

Mal

ta S

tock

Exc

hang

e, c

ontin

ued

its fo

urth

yea

r of o

pera

tions

of

offe

ring

shor

t cou

rses

to fi

nanc

ial s

ervi

ces

prac

titio

ners

, sta

keho

lder

s an

d th

e re

tail

mar

ket.

The

Inst

itute

is li

cenc

ed b

y th

e M

alta

Fu

rther

and

Hig

her E

duca

tion

Auth

ority

(MFH

EA) a

nd ru

ns o

ver s

ixty

affo

rdab

le c

ours

es o

n va

rious

asp

ects

of f

inan

cial

ser

vice

s.


In 2

020,

ove

r 1,1

20 p

erso

ns a

ttend

ed th

e 80

cou

rses

hel

d, a

nd in

202

1, a

s at

end

of S

epte

mbe

r, 76

5 pe

rson

s at

tend

ed th

e 52

co

urse

s he

ld.

All c

ours

es w

ere

offe

red

onlin

e an

d w

ill co

ntin

ue to

do

so fo

r th

e fo

rese

eabl

e fu

ture

. Fr

om 2

022,

the

inst

itute

pl

ans

to ru

n co

urse

s in

a c

lass

room

env

ironm

ent a

s w

ell a

s re

tain

ing

the

curre

nt o

nlin

e op

tion

whi

ch h

as p

rove

d to

be

popu

lar.

Th

e In

stitu

te is

als

o th

e le

ad c

oord

inat

or a

nd p

artn

er in

two

Eras

mus

Plu

s pr

ojec

ts –

‘I D

on’t

Know

’ is a

imed

at i

ncre

asin

g fin

anci

al

liter

acy

and

‘Tra

nsiti

on’ i

s ai

med

at d

evel

opin

g tra

inin

g to

ols

for e

ntre

pren

eurs

in th

e us

e of

blo

ckch

ain

tech

nolo

gy.

In a

dditi

on, a

s an

noun

ced

in th

e R

RP,

Gov

ernm

ent s

hall

publ

ish

a st

udy

asse

ssin

g un

empl

oym

ent b

enef

its in

Mal

ta. T

he s

tudy

sh

all a

sses

s th

e si

tuat

ion

and

mak

e co

ncre

te a

nd d

etai

led

reco

mm

enda

tions

to th

e G

over

nmen

t on

how

to im

prov

e ef

fect

ive

cove

rage

and

ach

ieve

bet

ter a

dequ

acy

of b

enef

its, b

oth

in te

rms

of d

urat

ion

and

effe

ctiv

e ac

cess

, whi

lst e

nhan

cing

the

ince

ntiv

e to

wor

k.


Extra Budgetary Units as at 31 December 2020Appendix Table 6.b

NACE CODE

NACE CODE

Arts Council Malta 90 Malta Government Technology Investments Ltd 84Agency for Infrastructure Malta 84 Malta Individual and Investor Programme Agency 84Bord tal-Koperattivi 84 Malta Information Technology Agency 63Broadcasting Authority 84 Malta Investment Management Co. Ltd 84Business First Ltd 84 Malta Philharmonic Orchestra 90Commonwealth Trade Finance Facility Ltd 64 Malta Residency and Visa Programme Agency 84Court Services Agency 84 Malta Resources Authority 84Correctional Services Agency 84 Malta Statistics Authority 84Depositor Compensation Scheme 64 Malta Tourism Authority 84Environment and Resources Authority 84 Manoel Theatre Management Committee 90Environment Protection Fund 84 Medicines Authority 84Film Finance Malta Ltd 84 Mental Health Services 87Fort Secuirty Services Ltd 84 MSE (Holdings) Ltd 64Foundation for Educational Services 84 National Audit Office 84Foundation for Medical Services 84 National Commission Persons with Disability 84Foundation for Social Welfare Services 88 National Development and Social Fund 84Foundation for Tomorrow’s Schools 84 Occupational Health and Safety Authority 84Gozo Channel (Holdings) Co. Ltd 77 Office of the Ombudsman 84Grand Harbour Regeneration Corporation 71 Planning Authority 84Heritage Malta 91 Projects Malta Ltd 84House Maintenance and Embellishment Co. Ltd 41 Projects Plus Ltd 84Housing Authority 84 Property Management Services 84Identity Malta 84 Protection and Compensation Fund 64Infrastructure Malta 71 Regulator for Energy and Water Services 84International Institute on Ageing 85 Resources Support and Services Ltd 78Investor Compensation Scheme 64 Safe City Malta Ltd 84Jobsplus 78 Sapport 88Lands Authority 84 Selmun Palace Hotel 84Libyan Arab Maltese Holdings Ltd 64 SportMalta 93Malta College of Arts, Science and Technology 85 St James Cavalier Creativity Centre 90Malta Communications Authority 84 Superintendence of Cultural Heritage 84Malta Competition and Consumer Affairs Authority 84 The Rehabilitation Hospital Karin Grech 86Malta Council for Economic and Social Development 84 Trade Malta Ltd 73Malta Council for Science and Technology 84 University of Malta 85Malta Enterprise Corporation 84 Valletta Cultural Agency 91Malta Gaming Authority 84 WasteServ Malta Ltd 38Malta Government Investments Ltd 84 Yachting Malta Ltd 73

Notes:

1. This list does not include entities which are already accounted for within the Departmental Accounting System (DAS) of Central Government.

2. General Classification of economic activities within the European communities. Industries are grouped into 64 categories (A64) based on NACE Rev 2.

4. Distributional Implications of Budget Measures


4. Distributional Implications of Budget MeasuresIt is not inevitable that economic growth will result in the sustained improvement in the well-being for all members of society. It is the willingness of Government to establish policy initiatives that ensure an equitable and inclusive society. One of the key priorities in the Government’s agenda is to address social imbalances, enhance social justice and make society more inclusive. In seeking to achieve these policy objectives, the Government continues to calibrate the tax and benefit policy framework to ensure that the generated economic prosperity is distributed fairly across individuals and social groups. Over the years, the Government has implemented a series of measures including the reduction in direct taxes, the in-work benefit scheme, the provision of free childcare and the tapering of benefits that were directed to incentivise more individuals to join the labour market while discouraging the unnecessary dependence on social benefits.

With the aim to strengthening household incomes and achieve a more equitable income distribution, the Government has increased pensions and provided tax incentives that benefit those on low incomes, while also introducing measures that would allow for older persons to remain active in the labour market and defer retirement. The Government also increased the allowance and widened the eligibility criteria of the carers benefits and introduced a new grant for parents that leave employment to take care of a disabled child. In addition, it has increased benefits for those with disability while increasing their opportunity to enter the labour market. Finally, the Government also provided increases in the rates for supplementary assistance, extended housing benefit and increased children allowance.

The COVID-19 pandemic created a series of challenges that disrupted both the economy and society at large; amongst others in employment, schooling and health. In this regard, the Government in the 2021 Budget focused on implementing and extending the social and economic support measures targeted to households and businesses, with the aim of sustaining economic capabilities, safeguarding jobs and easing liquidity pressures on businesses. The Budget for 2022 will seek to sustain the recovery from the pandemic whereby, through the Recovery and Resilience Facility, the Government will fund additional high-quality investment projects and structural reforms.

4.1 Government Initiatives in the Employment FieldOne of the objectives of several policy reforms in recent years has been to strengthen the labour force and to encourage vulnerable groups in society to participate in the labour market. The policy framework has provided incentives that encourage older workers to remain in the labour force, as well as policies to help workers strike a better balance between work and family life. As a result, higher employment rates were observed with notable increases in the participation of females, older workers and persons with disability. Nevertheless, the economic growth experienced in the past few years and the COVID-19 pandemic brought to the fore labour market challenges such as skills and labour shortages. In this regard, the Government in October 2021 launched the National Employment Policy targeting these challenges to move towards a more resilient and sustainable labour market. In response to the COVID-19 pandemic, the Government launched several rounds of assistance measures to protect employment with the principal measure being the wage supplement scheme. Such assistance measures, alongside the resilience of the Maltese labour market itself, ensured that high levels of employment were preserved. As a result, Malta has managed to maintain an unemployment rate which is one of the lowest among its European peers. In July 2021, Malta’s unemployment rate stood


at 3.3 per cent, well below the European Union (EU) average of 6.8 per cent. Data provided by Jobsplus for August 2021 continues to show that the number of persons registering for work is decreasing, recording a decline of 2,230 persons when compared to the corresponding month in 2020. Registered unemployment levels decreased for all age groups for both males and females. Although in 2020 there was an increase in

Source: National Statistics Office

Chart 4.2

Source: National Statistics Office based on Jobsplus database

Chart 4.1

0

1,000

2,000

3,000

4,000

5,000

6,000

Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21

Average number of unemployed persons registering for work

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2015 2016 2017 2018 2019 2020 2021

Unemployment Rate (15-74)

Quaterly Annual

per cent


Chart 4.3


the registered unemployment due to the COVID-19 pandemic, the number of persons registering for work has declined by 3,472 since 2015. The effect on unemployment is further corroborated with data from the Labour Force Survey, which shows a downward trend in the unemployment rates since 2015, excluding the increase in 2020 due to the COVID-19 pandemic.

According to the Labour Force Survey, during the second quarter of 2021, despite of the COVID-19 pandemic and restrictions imposed by the Government to combat the spreading of the virus, the number of employed persons increased by 8,317 individuals over the same period in 2020, reaching a total of 266,553 persons in employment. The number of employed persons aged between 15 and 64 increased by 1.8 percentage points relative to the same period in the previous year, standing at 74.4 per cent. The highest employment rates were recorded for people aged 25-54 whereby out of every 100 individuals, around 85 individuals were in employment, an improvement of 1.7 percentage points when compared to the previous year. On the other hand, the employment rate for persons in the age group of 15-24 declined. Although the employment rate for males in this age group declined by 5.8 percentage points, the employment rate for females in the age group 15-24 continued to improve, increasing by 3.7 percentage points from 2020. Similarly, a decrease of 1.0 percentage point in the employment rate was observed for males in the 55-64 age group while that of females improved by 4.5 percentage points, reaching to 41.8 per cent.

Over the years, budget measures have continued to improve the financial situation for low-income earners while contributing to an increase in the labour supply. Reforms in the social security system, aimed at making work pay, have encouraged increases in the participation rates for both males and females. Between 2015 and 2020, persons applying for social assistance decreased by 2,374 reaching a total of 4,598 in 2020. Single parents on social assistance are also decreasing year in year out, declining by 1,390

-2

-1

0

1

2

3

4

5

6

7

8

9

71.0

71.5

72.0

72.5

73.0

73.5

74.0

74.5

75.0

75.5

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2019 2020 2021

Employment Growth and Employment Rate

Employment rate (15-64) Employment growth 15+ (RHS)

per cent per cent


Chart 4.4


Chart 4.5


0

10

20

30

40

50

60

70

80

90

100

15-24 25-54 55-64

Employment Rates, Males

2020Q2 2021Q2

0

10

20

30

40

50

60

70

80

90

100

15-24 25-54 55-64

Employment Rates, Females

2020Q2 2021Q2

persons in 2020 when compared to figures in 2015. Furthermore, measures that reduced households’ expenses and enhanced employment income including the reduction in utility tariffs, the provision of free childcare, free school transport, the breakfast club, the maternity leave fund, the reductions in the income tax rates, the increase in the


tax rebate for employees, the widening of the non-taxable income tax bracket and the extension of the in-work benefit have continued to make employment more attractive.

Furthermore, during 2021, employees continued to benefit from the April 2017 National Agreement between the trade unions and employers on the Minimum Wage. As stipulated in the agreement, employees are benefitting from increases in their minimum wage upon completion of the first year of employment with the same employer. Employees are entitled to mandatory increases of €3.00 per week during the second year of employment, and an additional €3.00 per week in the third year of employment.

4.2 Indicators measuring Poverty, Social Exclusion andInequality

The indicators described in the following section are derived from the European Union Statistics on Income and Living Conditions (EU-SILC) survey. The EU-SILC aims at collecting timely and comparable cross-sectional and longitudinal multidimensional microdata on income, poverty, social exclusion and living conditions of households. The non-income components reported in the EU- SILC such as material deprivation and work intensity are based on the reporting year (t) while the income statistics refer to the previous year (t-1). Thus, the indicators of the at-risk-of-poverty (AROP) rate and income distribution, Gini-coefficient and S80/S20 indicators, for 2020 do not include the impact of the pandemic as they are based on income reference year 2019.

The main indicator to monitor the EU 2030 target on poverty and social exclusion, is the at-risk-of-poverty-or-social-exclusion (AROPE1) rate, which captures the share of the total population which is at risk of poverty or severely and socially materially deprived or living in households with very low work intensity. As illustrated in Chart 4.6, the indicator for Malta stood at 19.9 per cent in 2020, which is 0.9 percentage points lower when compared to 2019 and 0.3 percentage points lower than the rate recorded for 2016. According to the latest data available, in 2019, Malta’s AROPE was 0.3 percentage points lower than the rate recorded at EU level.

The AROP rate before social transfers for Malta stood at 35.1 per cent in 2020. In the EU, the rate was 43.0 per cent in 2019, which was 6.2 percentage points higher when compared to Malta’s corresponding rate for the same year. After the inclusion of social transfers, the AROP rate for Malta, which is one of the components of the AROPE, dropped by 18.2 percentage points to a rate of 16.9 per cent in 2020. A similar though weightier drop was also noted at the EU level, with a drop of 26.5 percentage points in 2019.

The AROP after the inclusion of social transfer for Malta has been, on average, fluctuating over the same rate in past few years, increasing from 16.5 per cent in 2016 to 17.1 per cent in 2019 and decreasing to 16.9 per cent in 2020. Nevertheless, it should be noted that the AROP thresholds, also known as the poverty line, for both single person households and households comprising two adults with two children younger than 14 years, increased by 19.3 per cent over the five-year period under review, reflecting the increase in the average equivalised income2. This may exacerbate the AROP rate as the increase in the poverty line alone captures more households below the threshold.

Chart 4.6 also illustrates the pattern of the two other components of the AROPE, including: severe material and social deprivation (SMSD) and low work intensity (LWI). In 2020, SMSD rate among persons living in households was equal to 5.1 per cent, 0.2 percentage points lower than the rate recorded in 2016. Additionally, when compared to the EU average based on 2019 data, the rate for Malta is 1.6 percentage points lower.


With regards to the share of persons residing in a household with LWI, this declined from 6.8 per cent in 2016 to 4.2 per cent in 2020. Compared to data as at 2019, the share of persons residing in a household with LWI is 3.2 percentage points lower than the rate recorded at EU level.

The income quintile share ratio (S80/S20) has increased in the past year, from a rate of 4.2 in 2019 to 4.7 in 2020. This indicate,s that for 2020, the income of the wealthiest 20 per cent of the population is on average 4.7 times higher than the income of the bottom quintile. The gap decreases to 3.5 times for persons aged 65 and over.

For the period 2019 to 2020, the Gini-coefficient after social transfers, increased from a ratio of 28.0 in 2019 to 29.9 in 2020. However, as indicated in Table 4.1, both the S80/S20 ratio and the Gini-coefficient are higher at EU level which confirms that in relative terms, income inequality is less pronounced in Malta. The gap between the values of EU27 and Malta, have also slightly increased during 2019, suggesting a further relative improvement for Malta. This suggests that in spite of increases in market income brought about by the rapid rate of economic growth, the Maltese Government was successful in sustaining improvements in distributional outcomes.

4.3 Measures targeting inclusive growth in 2022 BudgetThe aims of the Budget for 2022 are threefold. First, there is the objective to strengthen further the distributional policies enacted in recent years with the objective of creating greater social inclusion, promote social mobility and reduce poverty. Secondly, the Budget also seeks to provide the conditions for the economy to recover from the impact of the COVID-19 pandemic and creating employment within the framework of inclusive

Chart 4.6

Source: Eurostat

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At Risk-of-Poverty Indicators

AROP threshold - Single person (RHS)AROP threshold - Two adults with two children younger than 14 years (RHS)AROPE (LHS)AROP (LHS)LWI (LHS)SMSD (LHS)


economic growth. Thirdly, the Budget is also facilitating the Green Economy and Digital transitions.

Making Work PayThe Government will continue to support measures which enhance the disposable income of low and middle-income earners and incentivises people to work by extending and increasing measures which are aimed at making work pay. Such measures include the in-work benefit scheme, the tapering of benefits and the reduction of tax burden on workers, through tax rebates and lower tax on part-time and overtime work. Free childcare services will be extended to evenings and weekends for people working shifts to ease labour supply shortages in specific sectors. The Government will also be consulting with stakeholders to increase the minimum wage while preserving competitiveness and with regards to the creation of a new mechanism independent of the Cost-of-Living Adjustment (COLA) that targets vulnerable households, in particular low-income families with the scope of addressing high inflation.

The Elderly In 2020 there were around 25,700 individuals above the age of 65 who were considered to be at risk of poverty. Conscious of this reality, the Government will continue to adopt measures intended to reduce the risk of poverty amongst the elderly and this budget seeks to positively target pensioners. The 2022 Budget includes a number of measures aimed at financially enhancing the pensioners’ and the elderly’s income and also supporting the provision of informal long-term care. Most pensions, both contributory and non-contributory pension will increase in excess of the customary COLA. The taxable ceiling on pensions was also raised. The 2022 Budget also recognises the potential of active ageing and the contribution of the elderly to the labour market and has committed to exempt tax on income of working pensioners in five years’ time. Other measures were introduced to strength the support to households that hire private help at home. Such measures ensure that elderly persons are better placed to remain living in the community as opposed to institutionalisation in long-term care facilities.

Supporting FamiliesThe Government will continue to ensure that families with children on low income are shielded from the risk of poverty and social exclusion. In this regard, the Government will continue to support incomes through income supplements and bonuses linked to

Income DistributionTable 4.1

EU27 Malta2019 2019 2020

S80/S20 ratio 5.0 4.2 4.7 Less than 65 years 5.2 4.3 4.8 65 years or over 4.2 3.1 3.5Gini-coefficient 30.2 28.0 29.9

Source: Eurostat


childbirth or adoption, with a specific focus on low-income households. The Government will also be increasing the stipend allowance provided to students by 10.0 per cent.

Furthermore, the Government will continue building on measures introduced in previous years, the support to disabled persons and their families will be increasing further. Allowances for children with a physical or mental disability will rise. Parents who quit work to take care of their disabled children will also be supported further whilst the carer at home benefit will also increase. Other related subsidies and benefits have also been increased, including those intended to support mobility.

HousingThe Government is also continuing with its work in the area of affordable homes and social housing through extension of various affordable housing budget measures which were introduced in previous budgets such as housing benefit and Equity Sharing Plus Scheme, while the First-Time Buyer Scheme will be enhanced. New measures included intergenerational housing project and the introduction of a care plan for clients to support social mobility.

Footnotes:

1 The AROPE indicator for the EU 2030 target is made up of three components: at-risk-of-poverty (AROP) rate, severe material and social deprivation (SMSD) and low work intensity (LWI). The definition of this indictor is slightly different than the indicator used for the EU 2020 strategy. The SMSD indicator replaced the severe material deprivation (SMD) indicator whereby it now captures the proportion of the population experiencing an enforced lack of at least 7 out of 13 material and social deprivation items. The other difference relates to the extension of the age bracket of the LWI indicator from 0 to 59 years to 0 to 64 years. Further detail: Glossary:At risk of poverty or social exclusion (AROPE) - Statistics Explained (europa.eu).

2 AROP threshold is defined as 60 per cent of median national equivalised income.

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