Malta is on course to exit the EU’s Excessive Deficit Procedure (EDP) two years ahead of schedule, after registering a stronger-than-expected fiscal performance in 2024. The Finance Ministry announced the development on Tuesday, hailing it as a key milestone in the country’s economic recovery.

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The EDP is a corrective mechanism triggered when EU member states exceed deficit or debt thresholds. Malta entered the procedure in the wake of the COVID-19 pandemic, which saw government spending balloon to support the economy. But new data from the National Statistics Office shows that the country’s finances have turned a corner.

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According to the figures, Malta’s deficit for 2024 came in at 3.7% of GDP—down from the budgeted 4.5%. The improvement of 0.8 percentage points is a notable signal of fiscal consolidation. Even more significantly, the debt-to-GDP ratio has dropped to 47.4%, far below the projected 55.3% and well under the EU’s 60% threshold.

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In a press conference, Finance Minister Clyde Caruana credited the early exit from the EDP to “responsible fiscal management, prudent decision-making, and sound governance.” He said the government’s approach had succeeded in reducing the deficit while maintaining growth and avoiding cuts to the social safety net.

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Prime Minister Robert Abela also welcomed the results in a post on X, describing them as further proof that the government’s economic model is working. He said the improvement in the deficit was far greater than projected, and took aim at critics calling for tighter spending. “Our progressive formula to support families and businesses continues to deliver,” he said, while “those advocating austerity see their economy and public finances falter.” Investment, not cutbacks, he added, “is the way forward.”

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The Ministry has now revised its forecast for the 2025 deficit from 3.5% to 3.3%, reflecting continued confidence in the economy and government policy. The move reinforces Malta’s fiscal credibility within the EU and suggests less risk of future borrowing constraints or financial penalties from Brussels.

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Exiting the EDP ahead of schedule could also open the door to greater policy flexibility going forward. The government has pledged to maintain a commitment to fiscal sustainability, while continuing to invest in infrastructure and the social wellbeing of the Maltese and Gozitan people.

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The announcement comes at a time when many EU countries are still grappling with debt levels exacerbated by the pandemic, and renewed pressure from higher interest rates. Malta’s figures stand out in contrast, offering a rare case of a small EU economy that has managed to reverse pandemic-era deficits faster than expected.

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What remains to be seen is whether this performance can be sustained in the face of potential external shocks, including geopolitical uncertainty, inflation volatility, and the fiscal implications of an ageing population.