The Maltese Economy

Dr. Jean-Philippe Chetcuti | 14 Nov 2018

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The Maltese Economy

Malta’s economic prowess is an excellent reflection of its strategic location in the middle of the Mediterranean Sea. With access to Europe, North Africa and the Middle East, its fully developed open market economy, multilingual population and productive labour force, have further encouraged the country’s economic growth. 

According to Eurostat, Malta registered a €436.6 million government surplus in 2017, reaching 3.9% of GDP, and setting itself as the highest registered EU surplus for the year, exceeding the surplus registered by Germany and the Netherlands. Furthermore, the government debt-to-GDP ratio fell to 50.8% in 2017, and is expected to further diminish to 43.4% by 2019. Malta’s unemployment rate, more so, continues to ameliorate year by year and at present stands at just 3.7%, while the inflation rate registers at 1.37%.

The profile of real government consumption is noticeably influenced heavily by the influx attributed to the Malta Individual Investor Programme (IIP) which has generated favourable direct and indirect effects on the economy ever since its launch. According to European Commission forecasts, the Malta individual Investor Programme contributed 2.6% of the country’s GDP in 2017.

The Malta Economy - Malta GDP Growth

In 2017, the Gross Domestic Product (GDP) amounted to €11,108.6 million. Because of the increased economic performance, GDP economic growth for Malta in 2018 is expected to increase by 5.4%, which is more than double the forecasted EU average growth rate which stands at 2.1%. This indicates a vigorous yet moderated growth pattern following the 6.6% real GDP growth in 2017- one of the highest in the EU. 

The latest outlook in terms of the Maltese economy indicates that economic activity is expected to continue its robust growth which will likely be driven further mainly by domestic demand. In addition to this, the number of support measures indicated in Budget 2018 are all indicative towards further economic success. Projections indicate that this growth is expected to remain constant throughout 2018 and 2019. 

As a result of its burgeoning economy, Malta has constantly attracted positive reviews from international credit rating agencies, such as the ones displayed below:
 

  Date Rating Outlook
Moody's 21.08.2018 A3 Positive
Fitch 03.08.2018 A+ Stable
DBRS 17.08.2018 A Stable
Standard and Poor's (S&P) 24.03.2018 A- Positive

Malta Foreign Direct Investment

Inward FDI flows in Malta went up by €1.2 billion in the first months of 2017 alone. Some of the main pillars which have fuelled economy growth have included net exports and household consumption. Additionally, in 2016, foreign direct investment in Malta amounted to €161.36 billion, and during the first six months of 2017 went up an additional €1.2 billion. According to some of the latest figures published by the National Statistics Office (NSO), in July 2017, the contribution of financial and insurance activities was registered at €162.29 billion, which is equivalent to 98.1% of all foreign direct investment.

Businesses in Malta operate in a safe and yet attractive environment, directed by sound legislation and Maltese regulations which have shaped the island into an onshore jurisdiction offering countless cost-effective opportunities in the financial services, maritime and logistics, property development, aviation, iGaming, film industry, ICT, life sciences, biotechnological and chemical industries, and advanced manufacturing, among others. 

Latest reports show that most of Malta’s industrial output is accounted by international companies registered and operating in Malta amid attractive investment and incentive packages offered in the Maltese islands. The financial instruments being offered include soft loans, loan guarantees, interest rate subsidies and investment tax credits. The latter enables initial investments by supporting new establishments along with the development of existing businesses. According to the EU Commission’s Summer 2017 Economic Forecast, Malta ranked high in terms of financial services and ease of access to loans and soundness of banks, while the 2018 forecast predicts a strong push in investment supported by projects in the health, technology and telecoms sectors.

 

The Malta Economy - Malta Growth sectors

The Maltese economy has undergone several changes over the past years. Higher value-added sectors have grained traction, including online gaming, aircraft maintenance, pharmaceuticals, the film industry, property development, and more recently fintech and blockchain. This has indicated a decisive shift towards more knowledge-intensive sectors.

Traditional sectors like manufacturing and tourism have been sustained through competitiveness, whilst new economic sectors such as healthcare, energy, education and logistics have attracted considerable investment. Malta is considered as one of the fastest booming economies in the European Union and together with Germany it has managed to maintain sustainable economic growth during challenging times. 

In 2017, the wholesale and retail industry contributed approximately 22% of overall Gross Value Added (GVA). Public administration, education, health and social work registered a 17% contribution to GVA, while professional, technical and administrative support registered a 15.2% contribution. Additionally, the financial and insurance sectors have contributed an overall 6.2% to GDP. More so, manufacturing, mining and quarrying, have contributed some 10.2% to Malta’s GVA. The information and communication sectors have also seen a major increase, with a contribution rate of 6.6%.

The sound real estate sector generated an overall 4.9% contribution in 2017. The Maltese property market has maintained its upward trend with rental yields ranging around 6.64%. Most Maltese property sectors have been enjoying steady price increments which have been fuelled through the unwavering demand of both locals and foreigners, especially from developers, investors, and iGaming executives. 

The tourism sector continues to break record after record each year, with a total of 2,273,837 tourists visiting Malta for both business and leisure purposes representing an increase of 15.7% of tourists over the previous year. A staggering 1.9 million of these guests were on holiday, with 335,381 people here for business.
 


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