PKF Malta has issued a report which analyses the 2023 Budget speech by the Minister for Finance and Employment Clyde Caruana. PKF Malta stated that the budget focused on conveying a message of stability during a highly turbulent economic period. The Maltese economy has performed relatively well when compared to the rest of Europe amidst the geo-political turmoil associated with the Russian invasion of Ukraine. The country also recorded an annual real GDP growth of 8.5% for the first half of 2022, as employee compensation grew 8% from the previous year. However, rising inflation has still affected the Maltese islands due to high energy prices, supply chain disruptions, and a persistent increase in aggregate demand.

PKF Malta added that the government is committed to shield businesses and the private sector from experiencing major rises in their energy bills, in order to maintain their external competitiveness, was a key theme in the budget speech. The government wants to maintain current water and electricity rates while offsetting the rise in energy costs from public funds. In turn, as expected, due to rising inflation, the announced €9.90 weekly cost of living adjustment (COLA) was more than three times of the 2000-2021 average (€3.10). 

To minimise the influence of global volatility on domestic prices, the 2023 Budget also includes a number of incentives to diversify the overall business portfolio of Maltese firms. More specifically, a platform called "Start in Malta" will be set up to act as a one-stop shop for start-ups, and an innovative start-up incubator centre will be developed through EU funds. The Micro Invest scheme will also be expanded such that social enterprises will be qualified for a maximum tax refund of €70,000 over a three-year period. The government has also extended the grant scheme for purchasing various electric vehicles, ranging from motorcycles and mopeds to pedal electric cycles and motorised bicycles.

Looking ahead, the Finance Minister claimed that in 2023, the Maltese economy is expected to maintain the positive momentum observed in the second half of 2022. Employment growth is forecasted to stand at 3.4% in the upcoming year, with the unemployment rate hovering around 3.1%. Real economic growth is expected to slow down from 6% to 3.5% in 2023. Inflation is also expected to fall from 5.7% in 2022 to 3.7% in 2023. When addressing the sustainability of public finances, the Finance Minister claimed that the fiscal deficit as a percentage of the GDP is expected to decline from 5.8% in 2022 to 5.5% in 2023.

PKF Malta Senior Partner George Mangion said: "Our team of economists has provided a summarised version of the salient points from this year's budget. We believe this report will be useful for businesses and individuals wanting to understand the implications of the Budget speech."

To access the full report visit: https://www.flipsnack.com/pkfmalta/budget-2023.html