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Malta’s public finances through the COVID-19 pandemic

Juergen Attard and John Farrugia ()

No PP/09/2021, CBM Policy Papers from Central Bank of Malta

Abstract: In the years prior to the pandemic, the Maltese fiscal balance swung from a deficit into a surplus and the debt-to-GDP ratio declined by over one-third. However, the subsequent pandemic related economic shock led to a fall in revenue and simultaneously, the Government introduced several fiscal support measures leading to a significant increase in the fiscal deficit. The aggressive countercyclical policy safeguarded thousands of jobs, facilitated liquidity access to businesses and protected the most vulnerable households. It is expected that the fiscal stance will remain accommodative in the near term, in line with the guidance expressed by the European Commission. Defined consolidation measures to limit the increase in public debt brought about by COVID support measures need to be implemented in a way that safeguards the recovery process. Moreover, consolidation must allow for further investment in education, infrastructure and the institutional framework – all of which boost productivity and long-run economic growth. The use of Next Generation EU funds, which includes the Recovery and Resilience Fund, can help achieve this balancing act.

JEL-codes: E62 E65 E66 (search for similar items in EconPapers)
Pages: 29 pgs
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