Macroeconomic Overview
Malta's real GDP growth is expected to be 4.9% for 2024 and 4.3% for 2025, with domestic demand remaining the main contributor to economic growth in 2025. Inflation is projected to be 2.5% in 2024 and to ease to 2.1% in 2025. The Cost-of-Living Adjustment (COLA) for 2025 will be set at €5.24 per week.
Tax Compliance
Emphasis on tax compliance has resulted in the collection of €300 million in tax arrears and the conclusion of 1,200 new tax payment agreements. The percentage of timely filed tax forms increased to 93% in 2024 from 73% in 2023.
Budget Deficits
Government anticipates running significant annual budget deficits of around €850 million in 2025, and approximately €700 million per year in 2026 and 2027. It forecasts achieving a 3% deficit-to-GDP ratio by 2026, with Malta's GDP expected to grow from €22 billion in 2024 to over €25 billion in 2026. Public debt is projected to reach €13.4 billion by 2027, maintaining around a 50% public debt-to-GDP ratio due to the forecasted economic growth.
New Income Tax Rates
Below are the income tax rates and brackets for 2024 and the changes for 2025. By a way of an example, using the average wage of €23,000 income tax for a person opting for the single rate will go down from €3,025 to €2,350 for a reduction of €675.
Occupational Pensions
Every employee must be offered the option to join an occupational private pension plan by their employer. Employees can choose not to opt for just a private pension plan. Employers are not obligated to contribute to their employees' pension plans. Government will contribute up to a maximum of €100 per month for each public employee's private pension plan. The current tax incentives for both employers and employees for such occupational private pension plans remain unchanged.
Public Pensions & Elderly
Public pensions will increase by €8 per week in 2025. Individuals born from 1976 onwards will now need 42 years of National Insurance contributions (instead of 41 years) to be eligible for a state pension. Additionally, 80% of state pensions will be tax-free for pensioners who continue working post-pensionable age.
Widow’s pension to rise by €3 each week, benefiting 7,500 widowers across the country. National insurance exemptions for service pensions to rise by €200, now reaching €3,666, benefiting 3,250 service pensioners. Bonuses for people who didn’t pay enough national insurance contributions throughout their lifetime, some 16,000 people, mostly married women, will rise to €1,000 for people with nine years of contributions. Allowance for people aged between 75 and 79 who live at home to increase by €50 to reach €350. Those over the age of 80 will again receive €450.
Children's Allowance
Children's Allowance will increase by an additional €250 in 2025, on top of the €250 increase given in 2024, costing an additional €16.5 million annually. Allowances for parents with or adopting children will now cover the third child at €1,500.
Supplementary Assistance
The budget includes various measures, including an increase in the supplementary allowance for low-income individuals and increased assistance for those unable to work due to illness. These include:-
- €48m worth of COLA Plus payments to be given to 100,000 households, each receiving between €100 and €1,500 each year
- marriage allowance to rise by €170 to reach €500 each person (or €1,000 for a couple)
- People undergoing IVF treatment to benefit from 100 hours of paid leave for each treatment cycle (60 hours for the prospective mother and 40 hours for their partner). This will also apply to self-employed women, starting from next year.
- Foster parents to get an additional €10 per week, rising to €6,240 yearly for each child fostered.
- Tax credit increase of €250 for parents whose children attend specialised therapy.
- Assistance for those with severe disabilities will increase by €7.42 per week, and the allowance for children with disabilities will increase by €5 per week to €35 per week.
Education
Families sending their children to private schools can now reduce their taxable income by higher amounts: €3,500 for kindergarten, €4,600 for primary schooling, and €6,500 for secondary schooling. All children in primary, middle and secondary schools will be given a €20 book voucher to be spent at the 2025 Malta Book Festival.
Health
A new tender will soon be issued for the extension of the Emergency Department and the creation of a centre for Acute Psychiatry. €14 million will be allocated to reduce waiting lists for certain medical interventions. The government will finance a six-month gym membership for youths born in 2005, 2006, and 2007.
€4.5m will put towards programmes bringing mental health services close to the homes of those in need and sessions through video calls. Women’s sanitary products to be made tax-free, together with medical accessories used by female cancer patients.
Economy – Way Forward
Besides the Economic Vision 2050 document, the budget establishes that negotiations with the EU Commission are ongoing regarding international taxation and grants & credits as part of the 15% tax system.
Clean Transport & Energy
Government grants for electric vehicles will range from €2,000 for electric motorcycles to a maximum of €8,000 for electric vehicles and small vans. The benefit for scrapped cars will be €1,000, with an additional €1,000 for Gozitans. Sliema and Cospicua to get underground parking near ferry landings.
Existing grants for photovoltaic panels, battery storage and solar water heaters, among others, to remain in place. Work on offshore wind turbines and second interconnector to continue.
Social Dialogue
To strengthen social dialogue, government will set up an agency for public consultation and research for social partners. A new CEO will also be appointed for MCESD
