Budget 2006 has sent positive signals to economic operators in terms of the government’s commitment to reduce its share in the productive sectors of the economy and make further progress in the reduction of the structural deficit, The Malta Chamber of Commerce and Enterprise said yesterday.
The chamber said it had analysed the budget in conjunction with the measures taken in terms of the international escalation of oil and energy prices. It said it was encouraging to note that the deficit to GDP ratio has fallen from 5.1 to four per cent. It also said it looked forward to the achievement of next year’s projection (2.9 per cent) in fulfilment of the Maastricht criteria in preparation for adoption of the euro.
The chamber also noted, however, that the achievement of the 2006 fiscal targets relies heavily on the government’s success in raising Lm136 million from privatisation and the sale of assets, which will constitute a significant challenge.
The chamber again stated its firm belief that the solution to Malta’s fiscal and budgetary predicament lies in economic expansion. It said it was somewhat disappointed by the low GDP growth rate of 1.7 per cent (in real terms) registered over the January-September period. Nevertheless, it acknowledged that the rate of GDP growth was dampened by the impact of international energy prices and by a lower level of government recurrent expenditure.
The chamber reiterated that this year’s adjustment to the cost-of-living-increase to incorporate the increased electricity surcharge into the RPI with immediate effect was a dangerous precedent.
It said this measure was unnecessary due to the fact that not all workers paid electricity bills and that there may be more workers to electricity bill payers in a typical household.
The chamber said it took encouragement from the fact that there were no increases in income tax and value added tax. It said it hoped that the local tax system was not radically transformed because it was among the most business-friendly systems found in Europe.
The chamber said it was a firm believer in the concept of privatisation and was encouraged by the commercialisation of the Petrol Division of Enemalta.
It was also largely in agreement with the way in which the government says it will continue to restructure its remaining public entities, once the privatisation process has been concluded.
The chamber wholeheartedly agreed that the state cannot permanently subsidise loss-making entities and welcomed the Prime Minister’s statement that the restructuring process at the Drydocks had so far saved the economy Lm26 million.
Speaking about wines and spirits, the chamber said the increase in sales to tourists and local consumers, a drastic reduction in the contraband trade and the disappearance of goods brought over from Italy for personal use, should have the effect of increasing the government’s revenue, sustain employment, and once again give the legitimate trader the upper hand over the illegal one.
On the subject of innovation, the chamber said it looked forward to concrete advantages emerging from reforms at the Malta Council for Science and Technology but was somewhat disappointed that its recommendations to encourage a venture capital market had not been taken up, despite this being announced in the pre-budget document.
The chamber said it was a firm supporter of fiscal morality and had commented positively on the budget measures announced to reduce tax evasion and abuse of social services.