The European Commission predicts that Malta’s general government deficit will actually grow to 3.7% of the GDP this year, a full percentage point above the government’s own projects.

However, the government remains committed to meeting its target, and Finance Minister Edward Scicluna stressed that the government was confident that it could be achieved.

The projection is made in the European Economic Forecast for Spring 2013, which projects a marginal increase in the government’s current primary expenditure and a stabilisation of net capital expenditure.

But the Commission also believes that the government’s current revenue will decrease this year.

Economic growth is expected to lead to increased tax revenue, although the income tax cuts which started to be implemented this year will lead to a slowdown in the growth of such revenue. But in any case, this increased revenue is not expected to compensate for the disappearance of a number of one-off revenues registered last year.

The EU only expects the budget deficit to shrink to 3.6% in 2014, which would mean that Malta would remain firmly within excessive deficit territory. Excessive deficit procedures against Malta were only lifted last December, when budget projections for both 2012 and 2013 were significantly more optimistic.

In a statement, the government announced that Finance Minister Edward Scicluna and EU Affairs Minister Louis Grech have travelled to Brussels to discuss the issue with Economic and Monetary Affairs Commissioner Olli Rehn. The government intends to determine the basis of the Commission’s own forecasts, and the reason for the discrepancy with its own.

Prof. Scicluna said that the ministry’s own estimates indicate that the 2013 deficit will still be 2.7%, despite the Commission’s “disappointing forecasts.

“Government also notes that this further confirms how unrealistic the previous administration’s budget projection of 1.7% truly was and that government was correct in revising it upwards when it presented the 2013 Budget in April,” Prof. Scicluna added.

In its own reaction to the forecasts, the Nationalist Party said that they confirmed what it had warned about: that the new government’s revisions of spending – particularly the impact of a government with Malta’s largest-ever cabinet – would cause the deficit to skyrocket.

It said that the not only had the government given up on the 1.7% deficit target proposed by the previous government, but its own projections had also failed to convince the government.

The PN also pointed out that the deficit in the first three months of this year was €57 million lower than it had been in the corresponding period of 2012, stating that this confirmed that public finances were under control.

It said that it was up to the new government to ensure that it kept finances under control for the rest of the year.