Malta flag Malta: Economic and Political Overview

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, thus is really sensitive to its external environment. After exceptional growth in 2022 (8.1%), real GDP growth is estimated to have remained strong at 6.1% in 2023. Private consumption and net exports grew strongly. By contrast, gross fixed capital formation declined, amid weaker construction activity in 2023 (EU Commission). In 2024, growth is projected at 3.3% by the IMF, driven by net exports and private consumption, which should continue to grow strongly even if at lower rates than in the previous two years. Investment growth is expected to pick up after the construction slowdown, and public consumption is set to remain strong. Growth in 2025 is forecasted at 3.5%.

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 (6.5% in 2022 and 5.6% last year, as per the IMF). Similarly, the debt-to-GDP ratio increased to 54.1% in 2023 from 52.3% one year earlier, and is projected to follow an upward trend over the forecast horizon, landing at 56.1% by 2025 (IMF), as sizeable fiscal deficits should be partially offset by continued strong nominal GDP growth. Inflation in 2023 reached 5.8%, despite government intervention keeping energy prices at 2020 levels. Inflation in 2024 and 2025 is forecasted at 3.1% and 2.2%, respectively, with ongoing pressures in food and services prices, while retail energy prices are expected to remain stable due to government intervention.

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. In 2023, however, unemployment stood at 3.1% (from 2.9% one year earlier), with projections for a marginal increase over the forecast horizon (to around 3.3% by 2025). Increasingly, EU and non-EU European migrants are relocating to Malta for employment, though wages have remained low compared to other European countries. Nevertheless, 20.3% of the Maltese population was at risk of poverty and social exclusion in 2022, according to the latest data by Eurostat. Overall, the country's GDP per capita (PPP) was estimated at USD 55,928 in 2022 by the World Bank, above the EU average estimated at USD 54,249 for the same year.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 18.1420.3121.6822.9624.26
GDP (Constant Prices, Annual % Change) 6.93.83.33.53.5
GDP per Capita (USD) 34,81938,71541,12443,33245,560
General Government Balance (in % of GDP) -6.5-5.6-3.9-3.5-2.9
General Government Gross Debt (in % of GDP) 52.354.155.256.156.3
Inflation Rate (%) n/a5.83.12.22.0
Unemployment Rate (% of the Labour Force) 2.93.13.23.33.3
Current Account (billions USD) -1.03-0.60-0.63-0.55-0.42
Current Account (in % of GDP) -5.7-3.0-2.9-2.4-1.7

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Malta, the smallest economy in the Eurozone, boasts one of the most skilled, less expensive, flexible, and multilingual labor forces in Europe. Its economy is highly industrialized and service-based, while the agricultural sector only represents 0.9% of the GDP and employs around 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. Figures on the marketed output value produced by the agricultural sector in Malta during 2022 reveal an increase of 10.7% year-on-year to a total of EUR 135.5 million.

The industrial sector employs 17% of the workforce and represents 12.5% of the GDP. Malta does not have any mineral or energy reserves and is thus completely dependent on imports in this field. Its economy is primarily based on manufacturing, especially microchips and pharmaceutical products. The World Bank estimates that the manufacturing sector accounts for more than 7% of GDP.

Malta has put a lot of hard work into promoting its services and succeeded in becoming one of the main service centers in the Mediterranean region. Nowadays, the tertiary sector represents 78.9% of the GDP and employs 82% 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 2023, the country welcomed a record number of inbound tourists, exceeding the 3 million mark, up by 8.3% compared to the 2019 figures (data Malta’s Tourism). The national banking system comprises 24 banks, only three of which are Maltese majority-owned; as such, around 62% of the banking sector’s total assets of around EUR 40.4 billion are foreign-owned. There are six core domestic banks, whose assets (just below EUR 26 billion) represent 200.6% of Malta’s GDP (EBF, latest data available).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 0.9 17.9 81.3
Value Added (in % of GDP) 1.0 12.3 78.8
Value Added (Annual % Change) 8.5 n/a n/a

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

 

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Indicator of Economic Freedom

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

 
 

Country Risk

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Latest Update: May 2024

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