A Budget That “Builds, Not Fears” the Future
Finance Minister Clyde Caruana opened his 2026 Budget speech declaring it as “a Budget that does not fear the future, but builds it.” He described the new plan as “another socialist budget” designed to strengthen families, protect workers, and sustain economic growth amid European uncertainty.
“We stand before the people with one of the strongest economies in Europe,” Caruana said. “This is a Budget that gives courage and hope.”
Economic Outlook: Growth and Fiscal Discipline
Malta’s GDP grew by 3.1% in the first half of 2025 — more than double the EU average of 1.4%. Growth was driven mainly by domestic demand, strong exports of services, and a resilient tourism sector that welcomed 2.2 million visitors in the first seven months of 2025 (up 12.9%).
For 2026, the government forecasts 4.1% real GDP growth, with inflation stabilising near 2.2%.
| Key Indicator | 2024 | 2025 (est.) | 2026 (forecast) |
|---|---|---|---|
| GDP Growth (real) | 3.5% | 3.1% | 4.1% |
| Inflation | 3.3% | 2.5% | 2.2% |
| Deficit (% of GDP) | 3.5% | 3.3% | 2.8% |
| Debt (% of GDP) | 47.1% | 47.0% | 46.4% |
“Our country has strong foundations,” he said. “Even while helping families and businesses, we kept our finances sound.”
Major Tax Cuts for Parents and Families
The centrepiece of Budget 2026 is a €160 million tax reduction for families with children — benefiting around 68,000 parents.
“This is the strongest signal of faith in families that this government has ever given,” said Caruana.
Parents’ Tax Brackets (Married, 1 child)
| Income Range (€) | Tax Rate | Tax Due 2026 |
|---|---|---|
| 0 – 17,500 | 0% | €0 |
| 17,501 – 26,500 | 15% | €2,625 |
| 26,501 – 60,000 | 25% | €5,275 |
| 60,001+ | 35% | €11,275 |
By 2028, the tax-free threshold will rise to €22,500, saving up to €2,175 per year.
Parents’ Tax Brackets (Married, 2+ children – 2028)
| Income Range (€) | Tax Rate | Tax Due |
|---|---|---|
| 0 – 37,000 | 0% | €0 |
| 37,001 – 50,000 | 15% | €5,550 |
| 50,001 – 60,000 | 25% | €10,550 |
| 60,001+ | 35% | €16,550 |
Under these new rates, dual-income parents earning €30,000 each with two children will pay zero income tax.
Social Measures: Pensions, Benefits, and Cost of Living
Budget 2026 allocates €120 million in new social measures. The government announced a €10 weekly pension increase for 100,000 pensioners, with widows receiving an additional €3.50 weekly.
| Measure | Increase |
|---|---|
| Pension (all categories) | +€10 per week |
| Carers’ Grant | €5,368.89/year |
| Children’s Allowance | +€250 per child |
| Birth & Adoption Bonus | €1,000–€2,000 |
| In-Work Benefit | +€75 per child |
| Supplementary Allowance (Couples) | +€27.30/week |
| Bonus for Non-Pensioners | €600–€1,050 |
The Cost of Living Adjustment (COLA) for 2026 is confirmed at €4.66 per week, with the additional COLA mechanism continuing for vulnerable households.
“At a time when other European governments are cutting benefits, Malta continues to strengthen social investment responsibly.”
Housing & Social Inclusion
Social housing remains a priority. The First-Time Buyers Scheme is now permanent, granting €1,000 per year for 10 years to new homeowners. The government also raised the loan deposit support threshold to €250,000.
- €2 million for new lifts in social housing blocks
- Extended Rent Subsidy Scheme for pre-1995 rentals
- Equity-sharing schemes now open to those aged 25+
“We are giving young people the confidence to start a family and buy a home,” said Caruana.
Economy & Business: €100 Million Digital Investment
Caruana announced €100 million for digitisation and AI adoption across Maltese businesses. The funds will target technologies such as Artificial Intelligence, Blockchain, Robotics, Cybersecurity, and the Internet of Things.
| Measure | Benefit |
|---|---|
| Tax credit for R&D & Innovation | 175% deduction on eligible costs |
| MicroInvest cap | €65,000 (Malta) / €80,000 (Gozo) |
| Tax credit for AI/digital investment | 60% of investment value |
“We are putting the power of AI in everyone’s hands,” said Caruana.
Gozo: Growth, Connectivity and New Infrastructure
- New roads linking Rabat–Marsalforn and Nadur–Qala
- €20 million Victoria Park Project
- €7 million investment in new schools
- €280 monthly allowance for Gozitan students in Malta
- Gozo Rural Airfield project approved for eco-tourism
- Helipad and Renal Unit planned for Gozo General Hospital
“Gozo is no longer on the periphery — it is part of our national growth,” said Caruana.
Environment, Energy & Sustainability
- Second Interconnector (€300 million)
- Battery storage project for solar energy
- Offshore wind farm tender under evaluation
- €85 million Organic Waste Plant
- €17 million Skip Facility for 75,000 tonnes yearly
- €37 million Sant’Antnin Green Park redevelopment
- New Water distribution expansion
“This is how we build an economy that is cleaner and stronger,” said the Minister.
Education, Skills & Health
- €500 subsidy for Year 10–11 students
- 15% increase in stipends
- 20,000 new digital devices
- Expansion of Mater Dei’s neonatal and paediatric units
- €3.3 million for Cancer Research and Innovation Hub
- Free medicines for 65+
“The health system must grow with our people,” Caruana said. “We are investing to protect lives and dignity.”
Law, Order & Justice
- €6 million modernisation of Police IT systems
- New stations in Rabat (Gozo), Qormi, Mosta, Sliema, and Raħal Ġdid
- €9 million for fire and emergency equipment
- Digital case management and family court reform
The Minister’s Conclusion: “A Strong Economy, a Future for Our Children”
“This government does not rest. We came before you again with more prosperity, more jobs, and a future built on strength.”
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