Finance Minister Clyde Caruana warned that inflation is here to stay for an indefinite period of time, adding that government aims to deliver an expansive Budget for next year, despite external pressures.
Addressing the media and social partners during a meeting with the Malta Council for Economic and Social Development (MCESD) in preparation for the upcoming Budget, Caruana said that next year’s Budget will still be an “expansive” one, despite inflation rates going far beyond the 2%, which will remain for a “long period of time” before it returns to the normal rate.
Caruana said that the world is still experiencing effects in the supply chain after the pandemic, as well as the conflict in Ukraine.
He explained that the rising price of oil and an inflation rate which is “very far away” from returning to its regular rate, have had a number of effects worldwide, including Malta.
The current inflation rate is also the primary reason as to why international interest rates are set to remain high, and why economic growth across the EU is set to be relatively small, Caruana said.
Caruana said that the EU is discussing its “general escape clause” to implement excessive deficit procedures in countries whose debt exceeds 60% of their GDP, and those whose deficit exceeds 3%.
He said that the EU’s finance ministers are currently discussing new regulations for how a country can exit from an excessive deficit procedure.
Caruana said that after the clause is agreed upon, member states of the EU who enter such procedures will either be given four years to regulate themselves in line with the established thresholds or will be given seven years to do so while the European Commission orders what changes are needed to be made.
He said that this will also count for Malta, and that the country is aiming towards a deficit of 5%, noting that the country must fall in line with the EU’s rules, otherwise it would be subject to excessive deficit procedures.
Caruana said that the upcoming Budget is still an “expansive” one in the EU, in line with EU financial regulations, and that government will be spending more into the economy than it will receive.
He said that it is in the interest of all workers and employers, noting that government spending also gives way to inflation.
Caruana said that government will also work to keep Malta below the 60% debt threshold for the years to come.