Considering the dark clouds and darker perceptions that were swirling around, yesterday’s budget speech carries no thorns.

Essentially, the budget builds on what has been achieved over the past few years. It is true that the deficit figure is not, and should not be, the only measurement of the economy, because there are other indicators which are worth looking at.

However, it is one of the first economic indicators that is looked at internationally, and in Malta’s case – seeing it is on track to adopt the euro, it is a very important qualification.

This country can now boast it has practically halved the deficit figure, from Lm130 million in 1998 to Lm76 million this year and Lm54 million in 2006.

It has been a hard slog and painful for everyone, but the target has been met and Malta’s economic performance acquires more credibility because the country has kept to its stated target.

The government is moving to get the Lm20 million or so that are necessary to attain next year’s budget deficit figure not through increasing taxes but rather through fostering growth, and also through shifting by just a year the convergence target for 2007 to 2008.

This is no big deal. After all, the other EU member states that have problems with their deficit do not even hope to get anywhere there within the same timeframe.

But it has given Malta a well-earned breather.

For after last week’s huge increases in electricity and fuel rates (which will be adjusted today), the population was in no state to face other government-induced increases, even if for the most noble of intentions.

Having said all this, two points in yesterday’s budget predictions need careful monitoring.

First the inflation figure is on the rise, mostly due to the impact of the oil price increases. Even if this figure is comparable to that in other European countries, experience teaches us that it has to be very carefully analysed and monitored. In this respect, the government was wise to promise that the changeover to the euro will not have the same inflationary impact it had in other countries. We will hold the government to this promise.

Secondly, the fear expressed so many times in the past, even by government figures, was that once you start playing round with targets, then political pressure becomes too heavy to resist. And any slackening off of the pressure to reach targets may well result in making them easier to push back, and back and back. Remember that the next budget speech will be for pre-election year 2007 and more cuts in the deficit are expected. Care must be exercised to ensure that the new targets are kept and possibly improved.

Mainly the budget measures are more of the sort of business-as-usual rather than having many policy initiatives or changes.

This is worthwhile because there are still many policy initiatives undertaken by the present government that are still some way off from becoming effective.

At the same time, one would have perhaps wished for more initiatives, more development briefs and more projects being announced.

In the property market, for instance, there were many pleas for changes in the rent laws, but the government chose to only change the Capital Gains Tax system. As anyone can tell, the property market is perhaps the only really up-and-coming market on the island, and the government – the State, must partake of the gains that are being made there, not least through loosening the laws to enable owners of rented properties to get fair and just returns on their investment.

One would have welcomed more specific policy initiatives aimed at getting Malta Enterprise to attract more companies to the island, and just increasing the amount of money given to Malta Tourism Authority can hardly be seen as strengthening the tourism industry, at least based on the present year’s experience.

The tax credits for the film industry, and, even more importantly, the increased funds for the university and for research and development are very welcome, if they are used wisely – which has not always been the case.

The sigh of relief felt by many yesterday that no tax increases were announced will soon give way to despondency once the full impact of the oil price increases kick in. It is the government’s duty now to foster economic growth with all the power at its disposal, which is the only way through which the budget targets can be met and also the only way through which the country can cope with the increased oil prices.