The government is expected to place its goal of achieving a budget surplus by 2010 on the back burner and to revise its deficit targets upward in tomorrow’s budget to make way for an ambitious investment programme aimed at keeping the wheels of the economy turning during next year’s global economic downturn.

The government appears to be of the mindset that given the prevailing economic conditions, with a slowdown in international demand being forecast, the measures needed to be taken to attain the goal could cause serious harm to the country at this point in time.

The goal, the government believes, will still remain a medium term objective that could possibly be reached by 2011. It is being considered that the 2009 is not a year in which to place too much of a burden on a sensitive economy in which a number of Maltese factories and businesses are already feeling a distinct pinch.

Moreover, the prospects of the across-the-board hefty income tax cuts, following two consecutive years of tax breaks, can also be expected to be largely ruled out as the government aims to embark instead on an investment programme aimed at catalysing internal demand, the local economy and employment rather than placing more money directly into people’s pockets – funds that would either be saved, leaving little local economic impact, or spent, effectively exporting demand to the foreign markets where the vast majority of Maltese consumer goods are produced.

Some income tax cuts, however, could form part of a wider package to be announced in tomorrow evening’s budget speech, but the government is of the opinion that merely handing out tax breaks is not the solution to the problems looming on the horizon.

Both issues had served as central components of the PN electoral campaign’s economic stimulus package, announced during more bullish times in the year’s first quarter before the global financial meltdown and expected international recession reared its ugly head in earnest this summer.

The government’s target deficit of 1.2 per cent of gross domestic product will also be difficult to meet and is expected to be revised upwards so as to allow the government to embark on a public investment programme with strong private sector involvement – effectively putting funds at the government’s disposal to stimulate local economic activity in a number of areas.

The impetus package is expected to create new ways in which the private sector will be able to participate in a number of upcoming national projects, some of which will be announced in tomorrow’s budget.

In terms of measures to cushion people from the new utility tariffs, the government is expected to move to protect further the most vulnerable in Maltese society from the rate hikes, while at the same time ensuring that the more prosperous segments of society begin to pay for the full extent of what they are consuming – freeing up funds with which the government could spur economic growth in the turbulent times ahead next year.

Tomorrow’s budget is also expected to present a wide-ranging energy efficiency and renewable energy programme, a reform in the country’s vehicle registration and licensing systems, as well as additional funding to market Malta as a tourism destination – more important than ever considering the global financial climate.