Editorial | Bridging to the budget and beyond

Hopefully, a vaccine for COVID-19 is found and be available for commercial distribution by the first half of 2021 but until that becomes a reality, the country must adapt to the new circumstances

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The Budget is always an important date because it enables the government to outline its economic, fiscal and social targets for the following year.

However, this year the budgetary exercise takes on added significance at a time when the economy and public finances are ravaged by the COVID-19 pandemic.

With the budget slated for October, the Prime Minister’s declaration yesterday that the wage supplement in its current form and voucher scheme will be extended to the end of next month is welcome news. The extension bridges the few weeks until the budget.

However, businesses will be waiting for a longer-term plan of investment and support when the finance minister steps up to deliver Budget 2021.

The budget must have a short-term six-month relief package for companies that remain hard-hit by the pandemic. This relief package must include continuation of the wage support scheme, substantial relief from water and electricity bills and a reduction or elimination of government-induced costs such as licence payments.

But the plan must also provide short to medium term incentives to those businesses that want and can expand operations. This includes export-oriented companies.

It is only through cash earned from abroad that the Maltese economy can hope to generate steam to keep the engine going strong.

With tourism, unlikely to recover anytime soon, focussing on other export industries is going to be crucial.

COVID-19 exposed Malta’s dependence on tourism. The lack of tourists has not only impacted the companies directly involved in the sector but has caused a much larger ripple effect in the retail sector.

Malta must strive over the coming years to reduce its dependence on tourism by growing its export-oriented manufacturing base.

The budget must lay the groundwork for this. The government allocated €400 million in infrastructure investment for industries as part of the recovery package announced in June.

The investment was targeted at industrial estates and factory space but details on how and where the money will be spent have been scant.

The budget has to provide a clear way forward on how the country intends to expand and modernise the manufacturing base, targeting new niches in the process.

The budget must also bolster domestic demand through targeted economic and fiscal incentives.

But it must also support families on the lower end of the income scales to avoid a social backlash. Within this context, government has to steer away from an economic start-and-stop situation and opt for a cruising situation, even if this means moving forward at a slower pace.

Opening the economy recklessly, only to shut it down shortly afterwards because of the pandemic is more damaging than having an engine chugging along but never stopping.

This is why government must ensure that safety protocols remain in place and discipline emphasised. The authorities must also retain the nimbleness of lifting and re-introducing measures in response to evolving circumstances.

Hopefully, a vaccine for COVID-19 is found and be available for commercial distribution by the first half of 2021 but until that becomes a reality, the country must adapt to the new circumstances.

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