Malta: Economic and Political Overview
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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 it was severely affected by the outbreak of the COVID-19 pandemic and the restrictions that followed. After rebounding strongly in 2021, the country’s economy showed strong growth in both private and public consumption, as well as in the tourism sector, reaching an estimated overall growth rate of 6.6% in 2022. Due to the weaker performance expected by Malta’s trading partners, GDP growth is set to decelerate to 3.3% in 2023 before slightly increasing to 3.6% the following year (IMF).
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 (including raises in the weekly cost of living adjustment and pensions and child allowances, one-off payments to the most vulnerable, and tax refund cheques). Fitch Ratings estimates energy and food subsidies to amount to EUR 396 million by the end-2022 (2.4% of GDP) and EUR 605 million (3.5% of GDP) in 2023, partially offset by stronger-than-expected revenue growth, contributing to budget deficits of 6% and 4.9% of GDP, respectively (IMF). After decreasing from above 70% to around 50% in five years, the debt-to-GDP ratio increased to 57% in 2022 and is expected to follow an upward trend over the forecast horizon (58.2% and 58.4% in 2023 and 2024, respectively). Inflation reached 5.9% in 2022, despite energy prices being kept at the 2020 level by government intervention, and is set to remain elevated this year (at 4.6%) due to continuing pressures in food, transport, and imported goods prices.
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 2022, unemployment stood at 3.2% (from 3.5% one year earlier), with projections for a marginal increase over the forecast horizon (to around 3.4% by 2024). 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 2021, according to the latest data by Eurostat. Overall, the country's GDP per capita (PPP) was estimated at USD 34.127 in 2022 by the IMF, below the EU average estimated by the World Bank at USD 54.248 for the same year.
| Main Indicators | 2022 | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) |
| GDP (billions USD) | 18.14 | 20.31 | 21.68 | 22.96 | 24.26 |
| GDP (Constant Prices, Annual % Change) | 6.9 | 3.8 | 3.3 | 3.5 | 3.5 |
| GDP per Capita (USD) | 34,819 | 38,715 | 41,124 | 43,332 | 45,560 |
| General Government Balance (in % of GDP) | -6.5 | -5.6 | -3.9 | -3.5 | -2.9 |
| General Government Gross Debt (in % of GDP) | 52.3 | 54.1 | 55.2 | 56.1 | 56.3 |
| Inflation Rate (%) | n/a | 5.8 | 3.1 | 2.2 | 2.0 |
| Unemployment Rate (% of the Labour Force) | 2.9 | 3.1 | 3.2 | 3.3 | 3.3 |
| 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
Malta, the smallest economy in the Euro-zone, has one of the most skilled and less expensive, flexible and multilingual labour forces in Europe. Its economy is highly industrialised and service-based, while the agricultural sector only represents 0.4% 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. According to the latest figures from Eurostat, the agricultural sector output at constant prices registered an estimated year-on-year contraction of 2.3% in 2022.
The industrial sector employs 19% of the workforce and represents 12.8% 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 to become one of the main service centres in the Mediterranean region. Nowadays, the tertiary sector represents 77.7% of the GDP and employs 80% 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 sector generated an estimated EUR 1 billion of gross value added in 2021 (EY). 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 has been recovering in 2022 when the total tourism expenditure reached almost EUR 2.3 billion (2.3 times higher than the previous year, although still 17% below the 2019 level – data NSO). 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 (data EBF).
| 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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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.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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Latest Update: November 2023
