Clyde Caruana misses deficit target by €312 million

Finance Minister Clyde Caruana’s latest forecast puts Malta’s deficit approximately €312 million above the target he set only last April, with the deterioration emerging during his presentation of the government’s pre-budget document.

Caruana said he now expects a deficit of 2.8% of gross domestic product in 2026, against the 1.6% target announced only five months ago. The revised figure also reverses the promised improvement from the 2.2% deficit recorded in 2025.

Finance Ministry sources told The Shift that, using a rounded 2026 GDP estimate of €26 billion, the latest forecast implies a deficit of approximately €728 million, compared with €416 million under April’s target. The Finance Minister’s projected overshoot is 1.2 percentage points of GDP, or 75% of the targeted deficit.

The figures remain forecasts, with the final annual outcome still to be established.

Presenting the document to social partners, Caruana defended maintaining energy subsidies and warned of economic damage if they were withdrawn. He also acknowledged that the government’s fiscal projections might need adjustment.

In explaining the higher deficit, Caruana estimated this year’s energy subsidy expenditure at €392 million. That compares with a €230 million estimate reported only last month, an increase of €162 million.

The increase is equivalent to roughly half the estimated €312 million deficit overshoot. However, the subsidy estimates and deficit forecasts cover different revision periods, preventing a direct reconciliation.

Finance Ministry insiders said the published accounts contain no quantified explanation of the contribution of election-year commitments to the revised deficit. It provides no separate figures for additional government recruitment, promises implemented or dispute settlements beyond the amounts included in April’s forecast.

The available information therefore does not establish how much, if any, of the deterioration reflects election-related expenditure. Nor does it establish that increased energy subsidies account for the entire shortfall.

Caruana emphasised keeping the deficit below the European Union’s 3% ceiling.

The government’s latest projection remains within that ceiling while substantially missing its own April target. Neither the document nor the reported presentation sets out an itemised reconciliation of the approximately €312 million difference.