Editorial | Budget 2021: A lifesaver in a time of uncertainty

Budget 2021 provides a lifesaver for businesses in a period of great uncertainty.

The extension of the COVID wage supplement until the end of March was necessary to ensure that businesses to not go under and jobs are retained.

More important is government’s commitment to keep evaluating the situation to ensure that the financial aid can be directed to new sectors or companies.

Reviving a dead business is harder than enabling a struggling business to succeed. The wage supplement enables businesses to stay alive, even though they are struggling.

This measure will help the economic engine to continue chugging along, albeit at a slower pace and ensures that when things turn for the better, the players will still available to start running.

Another important measure is a fresh round of vouchers to encourage domestic consumption in targeted areas. This is a welcome development, especially in the normally slow months after the Christmas period.

An injection of €50 million will help to fuel additional spending that will partially mitigate the loss of income from tourism.

The situation will remain difficult – in some sectors more than other – at least until a COVID-19 vaccine is found. Hopefully this will become available by the second quarter of next year, if not earlier. The budget provides a bridge until then.

But other measures ensure more money will make it to families. An increase in certain benefits like children’s allowance, the widening of thresholds for other benefits, a more generous tax refund and pensioners receiving a higher weekly increase, are measures that not only address social disparity but help fuel consumption.

The emphasis on capital spending is also good news, with the modernisation of the road network remaining a priority.

In the budget, the government restated its commitment to invest €400 million in industrial estates over the next seven years, something we welcome because of its potential to attract new foreign direct investment. Such an emphasis also encourages existing industries to expand. Work on this plan must get off the ground.

It is crucial that Malta has a strong manufacturing and industrial service’s base. COVID-19 has exposed this country’s over-dependence on tourism as a cornerstone of economic growth and jobs.

While it is important that tourism picks up, it is equally important that Malta has other sectors it can rely on for its wellbeing.

In this sense, we expect Malta Enterprise to embark on an aggressive campaign abroad to attract foreign investment in different sectors.

A budget delivered in the shadow of a global pandemic is never an easy one to call. There is no manual to follow and decisions taken now may have to be reviewed in a few months’ time.

But government has shown willingness to spend even if this means a higher debt-to-GDP ratio.

On Monday, the Finance Minister used the advantage gained by fiscal surpluses posted over the past few years to put more money in people’s pockets and give the economy a cash boost.

In doing so, Malta’s debt next year is still projected to be below the 60% mark, giving the country more leeway if the going remains tough in the second half of 2021.

More importantly, the debt ratio gives the country a competitive edge in Europe, enabling it to start jogging and eventually running when the tide turns.