(Maltese Version below)
On 3 December 2015, the Malta Fiscal Advisory Council (MFAC) presented to the Minister for Finance its assessment of the fiscal forecasts for the years 2015 and 2016 prepared by the Ministry for Finance and presented in the Draft Budgetary Plan for 2016. This assessment was carried out as part of the MFAC’s functions as stipulated by the Fiscal Responsibility Act (2014). This Report follows the MFAC’s earlier assessment of 15 October 2015 regarding the Government’s macroeconomic forecasts contained in the Draft Budgetary Plan, wherein the MFAC had stated that the macroeconomic projections were within its endorsable range.
The alignment of Malta’s budget process to the European semester, through the bringing forward of the announcement of the Budget for 2016, increased the availability of data concerning the impact of the announced fiscal measures, making it possible for the MFAC to analyse more thoroughly the projected fiscal developments, particularly for 2016.
The fiscal deficit is projected to decline from 2.1% in 2014 to 1.6% in 2015 and to 1.1% in 2016. While these targets are somewhat more ambitious than those projected by the European Commission and the Central Bank of Malta, they are considered by the MFAC to be attainable, though especially in the case of 2016, there remains an element of downside risk.
The MFAC notes that whereas the projected GDP growth for 2015 and 2016 as published in the Draft Budgetary Plan was revised upwards compared to the projections presented in the April 2015 Update to the Stability Programme, the fiscal deficit targets for 2015 and 2016 were left unchanged. The MFAC’s view is that this more favourable macroeconomic outlook and the associated expectations of higher revenues provided a good opportunity for further fiscal consolidation in relation to the previously announced fiscal targets.
The MFAC notes that both expenditures and revenues are expected to be higher than originally projected in the Update of Stability Programme 2015-2018. A line by line analysis carried out by the MFAC indicates that the forecasts for the various tax revenue items looked plausible, as being compatible with recent trends and appropriately factoring in the impact of announced fiscal measures. On the other hand, there is an element of uncertainty regarding receipts emanating from the Individual Investor Programme, which accounts for an appreciable part of the projected revenue increase, as this source is subject to some degree of volatility.
Expenditure projections were also considered by the MFAC to be plausible and attainable. However, in some cases, the embedded expenditure restraint, such as on compensation of employees and intermediate consumption, appear somewhat challenging. In this respect, the MFAC encourages the authorities to push forward with the necessary reforms aimed at expenditure rationalisation, in order to avoid possible slippages from the announced targets.
The MFAC notes that the debt-to-GDP ratio is projected to decline from 68.3% in 2014 to 66.6% in 2015 and 65.2% in 2016. These projections are deemed to be achievable provided that the anticipated growth in the nominal GDP base materialises.
Finally, the MFAC notes the active involvement by the various experts within the Ministry for Finance and the National Statistics Office to ensure the appropriate transposition of revenue and expenditure flows from a cash basis into the ESA framework upon which adherence to the requirements of the Stability and Growth Pact is assessed. While this process offers reasonable guarantee of overall consistency of the fiscal forecasts, the MFAC considers that the current approach suffers from an element of fragmentation due to the involvement of different entities in the forecasting exercise. The MFAC invites the authorities to consider ways of streamlining the process and suggests that formal methodological documentation is prepared to facilitate a more robust forecasting process. Explanations and justifications for any changes in methodologies used should also be clearly outlined to enhance fiscal transparency.
The full report, entitled “An Assessment of the Fiscal Forecasts in the Draft Budgetary Plan for 2016”, is available on the website of the Malta Fiscal Advisory Council http://www.mfac.gov.mt
Il-Kunsill Fiskali Konsultattiv Malti jippubblika l-evalwazzjoni tat-tbassir fiskali tal-Gvern kif ippreżentat fl-Abbozz tal-Pjan Baġitarju għall-2016
Fit-3 ta’ Diċembru 2015, il-Kunsill Fiskali Konsultattiv Malti (MFAC) ippreżenta lill-Ministru għall-Finanzi r-rapport tal-evalwazzjoni tat-tbassir fiskali għas-snin 2015 u 2016 kif ippreparat mill-Ministeru għall-Finanzi u ippreżentat fl-Abbozz tal-Pjan Baġitarju għas-sena 2016. Din l-evalwazzjoni saret bħala parti mill-qadi tal-funzjonijiet li għandu l-MFAC skont l-Att dwar ir-Responsabbiltà Fiskali tal-2014. Dan ir-Rapport jibni fuq rapport ieħor ippubblikat fil-15 ta’ Ottubru 2015 li kien jinkludi l-evalwazzjoni tat-tbassir makro-ekononomiku uffiċjali inkluż f’Abbozz tal-Pjan Baġitarju għall-2016, fejn l-MFAC kien stqarr li dan it-tbassir kien plawżibli u aċċettabbli.
II-fatt li d-diskors tal-Baġit għall-2016 ġie mressaq ’il quddiem, biex iġib il-proċess baġitarju Malti jaqbel mas-Semestru Ewropew, żied l-informazzjoni disponibbli dwar il-miżuri fiskali mħabbra, u b’hekk l-MFAC seta’ janalizza b’iktar reqqa t-tbassir fiskali, partikolarment għall-2016.
Id-defiċit fiskali huwa mbassar li jinżel minn 2.1% fl-2014 għal 1.6% fl-2015 u 1.1% fl-2016. Filwaqt li dawn il-miri huma kemm xejn iktar ambizzjużi minn dawk imbassra mill-Kummissjoni Ewropea u mill-Bank Ċentrali ta’ Malta, l-MFAC iqis li dawn jistgħu jintlaħqu, għalkemm għall-2016, jibqa’ xi element ta’ riskju.
L-MFAC jinnota li filwaqt li t-tkabbir fil-Prodott Gross Domestiku (PGD) għall-2015 u għall-2016 li ġie ppubblikat fl-Abozz tal-Pjan Baġitarju għall-2016 ġie rivedut ’il fuq, meta mqabbel ma’ x’kien ippubblikat fl-Aġġornament tal-Programm ta’ Stabbilità ppubblikat f’April 2015, il-miri fiskali għas-snin 2015 u 2016 ma nbidlux. L-opinjoni tal-MFAC hi li x-xejra ekonomika iktar favorevoli, li wieħed jistenna li ġġib magħha iktar dħul għall-Gvern, kienet tagħti l-opportunità għal konsolidament fiskali iktar b’saħħtu milli kien imbassar qabel.
L-MFAC jinnota li kemm l-ispiża u kif ukoll id-dħul huma mistennija li jkunu iktar għolja milli kif kienu mbassra fl-Aġġornament tal-Programm ta’ Stabbiltà 2015-2018. Analiżi bir-reqqa mill-MFAC fuq id-dħul mit-taxxi varji juri li dawn l-istimi huma plawżibbli u kompatibbli max-xejriet riċenti u mal-impatt mistenni tal-miżuri fiskali ġodda. Mill-banda l-oħra, jidher li hemm element ta’ inċertezza fil-każ tad-dħul mill-Programm tal-Investitur Individwali, u li jkopri parti mportanti taż-żieda fid-dħul, peress li dan id-dħul jista’ jkun volatili.
It-tbassir tal-infiq kien ukoll meqjus mill-MFAC bħala plawżibbli u li jista’ jintlaħaq. Madankollu, f’ċerti każi, l-objettiv tat-trażżin tal-ispiża, bħal fuq il-pagi u l-konsum intermedju, jidher li jista jkun pjuttost iebes biex iseħħ. F’dan ir-rigward, l-MFAC jinkoraġġixxi l-awtoritajiet biex ikomplu jwettqu r-riformi li hemm bżonn bil-għan li jikkontrollaw l-ispiża, biex ma jkunx hemm tbegħid mill-miri kif imħabbra.
L-MFAC jinnota li d-dejn tal-Gvern meta mqabbel mal-PGD huwa mbassar li jinżel minn 68.3% fl-2014, għal 66.6% fl-2015 u 65.2% fl-2016. Dan it-tbassir huwa meqjus bħala li jista’ jintlaħaq kemm ’il darba t-tkabbir fil-PDG f’termini nominali jseħħ.
Fl-aħħar nett, l-MFAC jinnota x-xogħol intensiv minn naħa tal-Ministeru għall-Finanzi u tal-Uffiċju Nazzjonali tal-Istatistika, biex jiżguraw li d-dħul u l-infiq fuq bażi kurrenti jiġu aġġustati skont ir-regoli tal-ESA, li hija l-metodoloġija li tintuża biex l-obbligi tal-Patt ta’ Tkabbir u Stabbilità jiġu mkejjla. Filwaqt li dan il-proċess jagħti garanziji raġonevoli li jkun hemm konsistenza ġenerali fit-tbassir fiskali, l-MFAC iqis li dan il-proċess huwa frammentat peress li hemm diversi entitajiet involuti. L-MFAC jistieden l-awtoritajiet biex jikkunsidraw metodi kif jissimplifikaw il-proċess u jipproduċu dokumentazzjoni formali li tispjega b’mod dettaljat il-metodoloġija dwar it-tbassir fiskali, biex isaħħaħ il-proċess ta’ dan it-tbassir. Raġunijiet u ġustifikazzjonijet ta’ kull tibdil fil-metodoloġija għandhom ukoll ikunu spjegati b’mod ċar biex isaħħu t-trasparenza fiskali.
Ir-rapport sħiħ bit-titlu ta’ ‘An Assessment of the Fiscal Forecasts in the Draft Budgetary Plan for 2016’, jinsab fuq is-sit elettroniku tal-Kunsill Fiskali Konsultattiv Malti http://www.mfac.gov.mt.
The Council Members
The Council consists of three members including the Chairperson. The members are appointed by the Minister for Finance on the basis of their experience and competence in domestic and international macroeconomic and fiscal matters. The term of office of a member of the Fiscal Council is for four years, unless otherwise provided. A person may not be a member of the Fiscal Council for more than two consecutive terms of office but shall otherwise be eligible for reappointment. Members may not be removed from office unless a resolution is approved by the House of Representatives. Members shall not seek or receive instructions from public authorities or from any other institution or authority.
John Cassar White
John Cassar White joined the banking profession in 1972 and retired in 2008. He occupied various senior executive posts at the Bank of Valletta including those of Chief Officer Finance. He set up the Risk Division of the bank and served as Chief Risk Officer for eight years. He also chaired BOV’s Credit Committee and Risk Committee for seven years.
Between 2013 and 2016 he was chairman of BOV. At this time he led the bank’s project to join the Single Supervisory Mechanism as a result of which BOV now falls under the joint supervision of the ECB and the Malta Financial Services Authority. Mr Cassar White served as director of various companies in the financial services industry and other business enterprises. Between 2008 and 2013 he lectured in business studies in the Malta College of Arts, Science and Technology. He also worked as a business consultant to a number of private and public companies.
Dr Carl Camilleri is a Lecturer at the University of Malta within the Department of Economics (Faculty of Economics, Management and Accountancy). Over the past 10 years Dr Camilleri has been lecturing Econometrics at the Department of Economics. Over the recent years Dr Camilleri was also involved in the lecturing of a number of other courses, in particular: Applied Macroeconomics, Health Economics and the Economics of Ageing and Pensions at the same university. Prior to joining the Department of Economics, Dr Camilleri served in the public service within the Economic Policy Division (Ministry of Finance) for 10 years and held the position of Senior Economist within the same Division. Dr Camilleri was mainly responsible for macroeconomic forecasting within the division and during his stay at the Economic Policy Division, Dr Camilleri was involved in the modelling and analysis of pension reform systems within the Maltese economy. Dr Camilleri holds a Master of Science degree in Econometrics awarded from Queen Mary and Westfield College (University of London) in 1999 and has been awarded the Degree of Doctor of Philosophy in Economics from City University (London) in 2015.
Ian P. Cassar
Ian P. Cassar
Dr. Ian P. Cassar is a Lecturer at the University of Malta within the department of Economics (Faculty of Economics, Management and Accountancy). His main teaching areas include introductory macroeconomics, intermediate macroeconomics, applied macroeconomics and mathematical economics. His research interests include input-output analysis, social accounting matrices, computable general equilibrium modelling, and the economics of tourism. He graduated with a Bachelor of Commerce (Hons) in Economics from the University of Malta in 2006. Subsequently in 2007 he obtained a Master of Science degree in Economics from the University of Edinburgh. In 2013 he was awarded a Ph.D. in Economics from Heriot-Watt University (Edinburgh). Over his period at Heriot-Watt University Dr. Cassar was also employed as a research assistant and was part of a team of economists who worked with BP plc to produce their “BP Statistical Review of World Energy”, one of the most widely respected and authoritative publications in the field of energy economics.
Dr. Cassar has also served as director of the Malta Statistical Authority and currently occupies the position of associate editor for Economics within the academic journal of Xjenza, which is the official journal of the Malta Chamber of Scientists.