Malta flag Malta: Economic and Political Overview

The economic context of Malta

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

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 a considerable drop in 2020 (-8.3%), real GDP growth is estimated to have rebounded strongly to 5.7% in 2021 (IMF), supported by a better performance of the tourism sector, as well as by domestic consumption and investment. The economy is expected to reach its pre-pandemic levels by mid-2022, with overall growth reaching 6% over the year (underpinned by the implementation of the EU Recovery and Resilience Plan), followed by 4.9% in 2023.

Malta’s public finances have been significantly consolidated in recent years, with the government budget turning positive. However, in the last couple of years national authorities had to deploy a series of measures to mitigate the effects of the pandemic, including wage support and voucher schemes, healthcare-related outlays and utility and rent subsidies for businesses. Although tax revenues partially recovered, in 2021 the budget deficit was estimated at 9.3% by the IMF. As the economy continues its recovery and support measures are phased out, the deficit is projected to decline to 5.2% of GDP this year and 4.2% in 2023. After decreasing from above 70% to around 50% in five years, the debt-to-GDP ratio surged to 63% in 2021, and is expected to follow an upward trend over the forecast horizon (65.3% and 66.5% in 2022 and 2023, respectively). Headline inflation stood at 0.7% in 2021; the increase in food, transport and imported goods prices is set to drive up price pressures in 2022, with inflation projected at 1.8%.

Unemployment in Malta continues to be among the lowest in the EU, with a continuous decrease in unemployment has been witnessed for all age groups and categories in recent years. In 2021, unemployment stood at 3.6% (from 4.3% one year earlier), thanks to the positive contribution of the professional services, construction, and public sector. The IMF forecasts a stable level in the short term (at 3.5%). Increasingly, the EU and non-EU European migrants are relocating to Malta for employment, though wages have remained low compared to other European countries. Nevertheless, one in five people in private households in Malta was at risk of poverty and social exclusion in 2020, according to the latest data by Eurostat.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 15.7314.9016.7018.2119.70
GDP (Constant Prices, Annual % Change) 5.7-8.35.76.04.9
GDP per Capita (USD) 31,86628,955e31,99734,55437,121
General Government Balance (in % of GDP) 0.0-7.0-9.3-5.2-4.2
General Government Gross Debt (in % of GDP) 40.653.3e63.065.366.5
Inflation Rate (%) 1.50.80.74.72.8
Unemployment Rate (% of the Labour Force) 3.64.33.63.53.5
Current Account (billions USD) 0.87-0.52-0.40-0.050.13
Current Account (in % of GDP) 5.5-3.5e-2.4-0.30.7

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Malta, the smallest economy in the Euro-zone, has one of the most skilled and less expensive labour forces in Europe, flexible and multilingual. Its economy is highly industrialised and service-based, while the agricultural sector only represents 0.6% of the GDP and employs around 1% of the workforce (World Bank, latest data available). Malta produces less than a quarter of its food needs, has limited freshwater supplies and scarce energy sources. The main crops are potatoes, green peppers, grapes, cauliflower, tomatoes, wheat, barley, and citrus. According to the latest figures from Eurostat, the agricultural sector registered an estimated contraction of 4.5% in 2020, mostly due to the COVID-19-induced crisis. This was the second-sharpest decline in the EU, after Romania.

The industrial sector employs 18.9% of the workforce and represents 13.4% 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 7.7% of GDP, though it contracted by an estimated 5% in 2020 amid the COVID-19 crisis (National Bank of Malta, latest data available).

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. The tertiary sector represents 76.1% of the GDP and employs 80.1% of the workforce. The financial sector manages assets equivalent to more than 500% of GDP and contributes about 15% of public revenues. Malta was the first EU state to regulate the online gaming industry and has established as a significant iGaming hub in the region. The tourism sector is the economic engine of the country, and its direct contribution to GDP (around 27%) is among the highest in the EU. The sector was strongly affected by the COVID-19 crisis and has been slowly recovering: preliminary data from the national statistical office show that during the first nine months of 2021, total tourist trips increased by 7.4% over the same period one year earlier. The national banking system comprises 27 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 (EBF).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.0 18.9 80.1
Value Added (in % of GDP) 0.6 13.4 76.1
Value Added (Annual % Change) -10.7 n/a n/a

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:

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

See the country risk analysis provided by Coface.
 

Return to top

Sources of General Economic Information

Ministries
Ministry of Finance and Economic Affairs
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
 

Return to top

Any Comment About This Content? Report It to Us.

 

© Export Entreprises SA, All Rights Reserved.
Latest Update: July 2022