A “miserable” economic growth rate must be addressed if Malta is to eventually catch up with the rest of the EU, Finance Minister Edward Scicluna argued this evening.
Prof. Scicluna was speaking at a consultation meeting on the 2014 Budget at the Phoenicia Hotel in Floriana, the first of three public consultation meetings which are being organised by the ministry. The next meeting will be held at the Inspire centre in Marsascala next Wednesday, while the final meeting will take place at the Grand Hotel Mgarr in Gozo the following Tuesday.
In his introductory remarks, the minister observed that Malta’s annual economic growth averaged 6-7% until the mid-nineties, falling to less than 4% after that. Since 2000, the rate has not exceeded 2%, which the minister insisted was not satisfactory.
Prof. Scicluna pointed out that one issue was that the local economy was not achieving its full potential, stating that due to a low proportion of women in gainful employment and with “early retirement schemes galore” in the past, less than half of the population is gainfully employed.
Adding to this problem, the minister said, was Malta’s high proportion of early school leavers, which created unskilled workers with few job opportunities. He noted that it was useless to try to attract investment without the capacity to address it.
Prof. Scicluna also brought up the issue of pensions, pointing out that Malta’s pensioners currently relied on the contribution of 170,000 workers: if this number went up to 200,000 or more, he added, pensions would be easier to sustain.
With this in mind, the minister said, the government was prioritising measures such as free childcare centres for working parents, investment in the Klabb 3-16 after-school care service, and increasing maternity leave, all of which helped encourage more people to join the workforce.
He also pointed out that the government had limited revenue to work with, and that a sizeable chunk was tied up in salaries, pensions, social services and other commitments. The rest, he said, must be utilised as effectively as possible, remarking that he was meeting one minister after another to ensure this was the case.
The minister noted that measures such as the permanent residency scheme would help increase revenue, adding that other measures would be announced in the near future. He also noted that the government was not only looking towards Europe but beyond, mentioning ongoing discussions with Libya and China as examples.
Prof. Scicluna also said that government’s debt was a “historic burden,” pointing out how the government paid €200 million in interest payments annually, even though, he pointed out, the recipients were local bondholders.
Next year, he explained, the government would have to borrow an additional €150 million – 2.1% of the GDP. But he added that the government now had a plan to reduce the amount it needs to borrow, comparing the situation to an addict weaning off a drug “we have grown used to.”
A question on minimum wage earners prompted the minister to stress the need to address the so-called welfare trap, through which people were discouraged from working as they would not gain much once their benefits are lost. This had to be addressed through a scheme which encouraged people to work whilst still providing them with assistance, he said, adding that his ministry was discussing the issue with the Education Ministry.
On a number of occasions, Prof. Scicluna also seized the opportunity to criticise the previous government, noting, among other things, how lack of planning on energy was the elephant in the room.
At one point, he noted that the ministry’s budget for such meetings and other events concerning the upcoming budget were considerably less than they should have been as his predecessor approved invoices totalling €400,000 on the eve of last March’s election concerning the promotion of the previous government’s last budget, which had been rejected in December.