The economic context of Malta

Economic Indicators

Malta is considered a high-income country and an innovation-driven economy. Thanks to its sound financial foundations, large infrastructure projects, and buoyant domestic demand, the country emerged from the euro area crisis better than most EU Member States, registering one of the highest real GDP growth rates in recent years. Nevertheless, Malta’s economy relies heavily on the tourism sector and international trade and thus is sensitive to its external environment. Between 2014 and 2023, growth averaged 6.75%, the second-highest rate in Europe. Output growth is expected to slow from 7.5% in 2023 to 5% in 2024 and 4% in 2025, still among the highest in Europe. Over the medium term, Malta’s economy is projected to continue outperforming other European countries, although structural constraints will limit growth potential. The IMF estimates medium-term growth at 4%, well above the EU average but below the pre-pandemic average. This reflects lower global growth prospects and the maturing of the gaming sector, which had previously driven Malta’s growth. Growth in labour-intensive industries, particularly tourism, may also slow as the authorities adopt a more targeted immigration policy.

Malta’s public finances have been significantly consolidated in recent years, with the government budget turning positive. However, in the last few years, national authorities had to deploy a series of measures to mitigate the effects of the pandemic and high energy and food prices, resulting in an increase in budget deficits (4.1% in 2023 and 4.6% last year, as per the IMF). The 2025 budget aims to reduce the fiscal deficit to 4% of GDP, with lower revenue offset by reduced spending as a share of GDP. Key measures include: a projected decline in income tax revenue by about ½% of GDP due to an upward adjustment of personal income tax brackets for inflation; a decrease in capital and other current revenues; a reduction in employee compensation following one-off retroactive payments related to recent public wage settlements; and a decline in subsidies, including energy, due to lower global energy prices despite fixed retail energy prices. Capital spending is also expected to temporarily decrease due to lower EU fund disbursements. Similarly, the debt-to-GDP ratio increased to 47.7% in 2024 from 47.3% one year earlier and is projected to follow an upward trend over the forecast horizon, landing at 48.7% by 2026 (IMF), as sizeable fiscal deficits should be partially offset by continued strong nominal GDP growth. While goods inflation has dropped below 2% in 2024, inflationary pressures persist in services, particularly in transport and tourism-related sectors where demand remains strong. The rate is expected to stabilize around 2% by mid-2025 (IMF).

Unemployment in Malta continues to be among the lowest in the EU, with a continuous decrease in unemployment for all age groups and categories in recent years. According to the EU Commission, employment grew by 4.3% in 2024, driven by high immigration flows to address the intense labour and skills shortages in the domestic market. While employment growth is expected to decelerate, it will remain strong at 3.1% in 2025 and 2.8% in 2026. The unemployment rate stayed low at 3.2% in 2024 and is projected to drop marginally to 3% by 2026. However, high employment growth in low-paid sectors is expected to keep nominal wage growth per employee modest throughout the forecast period, rising slightly above projected inflation. Overall, the country's GDP per capita (PPP) was estimated at USD 72,941 in 2024 by the IMF, above the EU average. Nevertheless, 19.8% of the Maltese population was at risk of poverty and social exclusion in 2023, according to the latest data by Eurostat.

Main Sectors of Industry

Malta, the smallest economy in the Eurozone, boasts one of the most skilled, less expensive, flexible, and multilingual labour forces in Europe. Its economy is highly industrialized and service-based, while the agricultural sector only represents 0.7% of the GDP and employs around 1.1% of the workforce (World Bank, latest data available). According to the latest Census of Agriculture, in the period 2010-2020, the number of agricultural holdings decreased by 14.8%, to 10,449 (of which 41.4% produce solely for their own consumption). Malta produces less than a quarter of its food needs and has limited freshwater supplies and scarce energy sources; the main crops being potatoes, green peppers, grapes, cauliflower, tomatoes, wheat, barley, and citrus. In 2023, the local agricultural sector's output grew by 2.4% compared to the previous year, reaching EUR 138.7 million. The sector's intermediate consumption, which includes most expenses incurred during the production processes, rose by 3.2%, totalling EUR 87.2 million in 2023. The gross value added of the agricultural sector increased by 1.0% over the previous year, reaching EUR 51.6 million (data NSO).

The industrial sector employs 17.6% of the workforce and represents 11.7% of the GDP. Malta does not have any mineral or energy reserves and is thus completely dependent on imports in this field. Its industrial sector is primarily based on manufacturing, especially microchips and pharmaceutical products. Malta's chemicals industry, although smaller in scale compared to larger manufacturing hubs, plays a crucial role in the country's economy and supports several other sectors, including pharmaceuticals, construction, and manufacturing. The World Bank estimates that the manufacturing sector accounts for around 6% of GDP.

Malta has put a lot of hard work into promoting its services and succeeded in becoming one of the main service centres in the Mediterranean region. Nowadays, the tertiary sector represents 80.6% of the GDP and employs 81.3% of the workforce. The financial sector is the most important, managing assets equivalent to more than 500% of GDP and contributing about 15% of public revenues. Malta was the first EU state to regulate the online gaming industry and has become a significant iGaming hub in the region. The tourism sector is the economic engine of the country, and its direct contribution to GDP (around 15%) is among the highest in the EU. The sector was strongly affected by the COVID-19 crisis, but it has recovered: in 2024, the country welcomed a record number of inbound tourists (3.56 million), with a total expenditure of EUR 3.3 billion (up by 23.1% y-o-y – data NSO). Over the past three decades, Malta's banking sector has expanded from four retail banks to 21 licensed banks by the end of 2023, with only three being Maltese majority-owned. The others are owned by entities from various EU and non-EU countries, including Austria, Belgium, Greece, Kuwait, Qatar, Turkey, and the UK. Over 60% of the sector’s assets, totalling around EUR 46 billion, are foreign-owned. Six core domestic banks hold assets worth EUR 32.8 billion, representing 169% of Malta’s GDP, and employ 81% of the sector’s workforce, around 5,532 people. Two of these banks dominate the local market, controlling 64% of the assets (data European Banking Federation).

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	1.1	17.6	81.3
Value Added (in % of GDP)	0.7	11.7	80.6
Value Added (Annual % Change)	-9.5	5.3	6.6

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

Find more information about your business sector on our service Market reports.

 

 

Find out all the exchange rates daily on our service International currency converter.

 

Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:

70,2/100

World Rank:

36

Regional Rank:

21

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

 

Sources of General Economic Information

Ministries

Ministry of Finance
The Ministry for Education and Employment
Official list of ministries

Statistical Office

National Statistics Office

Central Bank

Central Bank of Malta

Stock Exchange

Malta Stock Exchange

Economic Portals

Malta Business Bureau