Malta has a small but robust economy that is heavily dependent on foreign trade and services. The country’s strategic location in the Mediterranean has made it a popular destination for businesses looking to expand into Europe, North Africa, and the Middle East.
In recent years, Malta has experienced steady economic growth and has been ranked as one of the fastest-growing economies in the European Union. The country’s GDP per capita is one of the highest in the region, and its unemployment rate is relatively low.
The European Commission said in November 2023 that Malta’s GDP growth was expected to reach 4% in 2024, down from 6.9% in 2022. Malta was the only member state to reach 4%. Romania and Ireland came second and third with projected GDP growth of growth of 3.1% and 3% respectively. Poland (2.7%) and Cyprus (2.6%) completed the top five.
The Commission said private consumption had slowed down slightly in Malta due to higher inflation while investment had decreased against the exceptional surge in aviation sector investment in 2022. However economic growth was forecast to remain robust at 4.0% in 2024 and 4.2% in 2025.
The tourism sector continues to rebound strongly, already exceeding the pre-pandemic levels, with further growth prospects in 2024 and 2025.
The Commission said Malta was expected to maintain a high pace of employment and population growth, a key factor driving the outlook for consumption despite the expected weak recovery in real wages. This increase was fuelled by strong labour demand which increased across all sectors of the economy, both public and private, and was especially strong in tourism and administrative services.
The labour force was also set to continue growing at a robust pace in 2024 and 2025 in line with population growth as the country continues to attract foreign workers. Malta’s unemployment rate fell to 2.9% in 2022 and is expected to fall further to 2.7% in 2023, 2024 and 2025.
Inflation also appears to be on a downward trend, judging by government projections. Having peaked at 6.1 per cent in 2022, local inflation is now likely to measure 5.7 per cent by the end of this year, before dropping significantly to 3.7 per cent in 2024 and to the European Central Bank’s target rate of 2 per cent by 2025.
Those projections will come as a relief to many households, which have struggled to keep pace with the rising cost of living in recent years, as well as policymakers who have found it hard to keep food inflation in check.
Malta’s openness to international trade and investment has enhanced its competitiveness. Despite relatively good performance in many areas of economic freedom, some institutional foundations remain weak, undermining prospects for more dramatic growth. The court system is transparent and relatively free of corruption, but it is also inefficient. Bureaucracy continues to discourage dynamic entrepreneurial activity.
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