This 2020 Article IV Consultation focuses on Malta’s near and medium-term challenges and policy priorities and was prepared before coronavirus disease 2019 became a global pandemic and resulted in unprecedented strains in global trade, commodity and financial markets. Pursuing structural reforms is expected to help sustain Malta’s growth performance while promoting social inclusion. The focus should continue to be on encouraging female and elderly participation in the labor market, upskilling the labor force and stimulating innovation. Moreover, to safeguard the business climate, remaining governance shortcomings should be addressed without delay, including by stepping up the fight against corruption and by increasing the efficiency of the judicial system while ensuring its independence. Improving access to affordable housing remains a key priority in support of greater inclusion. It is imperative to maintain gradual consolidation to ensure a balanced structural budget excluding proceeds from the Individual Investor Program. The IMF staff suggests continuing addressing infrastructure needs while upgrading public investment efficiency. Improve fiscal risk analysis and management.
This Article IV Consultation highlights that Malta has been one of the fastest growing countries in the European Union after the crisis, because of a rapid structural rebalancing towards export-oriented services—mainly remote gaming and tourism. The authorities are now exploring new development areas around the blockchain technology. As per the authorities, domestic demand would continue to be the main driver of growth, and persistent labor market tightness might eventually put some pressure on wages and prices. They consider global protectionism as a key external risk and emphasized ongoing actions to address domestic risks related to money laundering. The report also shows that Malta’s new development areas related to the distributed ledger technology present both opportunities and risks. The IMF team stresses that policies should focus on enhancing the economy’s resilience, ensuring financial stability and integrity and making growth more inclusive. It is important to promote strong and inclusive growth by encouraging further labor market participation of women and elderly workers.
This 2017 Article IV Consultation highlights that Malta’s economic growth remains one of the strongest in Europe, owing to favorable economic conditions and sound policies, which advanced structural reforms and supported the strengthening of private and public balance sheets. Output is estimated to have expanded by 6.8 percent in 2017, accompanied by dynamic job creation, which brought unemployment to a record low. Strong inflows of foreign workers and rising labor force participation kept wage pressures contained in most sectors, thus contributing to low inflation despite a positive output gap. The outlook is favorable, with growth decelerating gradually and converging to about 3 percent over the medium term.
This staff report on Malta’s Article IV Consultation highlights economic development and policies. Risks from the large international bank sector appear contained given limited balance-sheet exposure to the Maltese economy, though continued vigilance is warranted. Regulatory changes to increase loan loss provisions, and the funding of the deposit compensation scheme would help contain risks in the domestic banking sector. The main challenges for fiscal policy are to reverse the deterioration of public finances, and to strengthen the governance framework. Additional measures are needed to ensure that the fiscal deficit falls below 3 percent of GDP in 2013 and that public debt remains on a sustainable path.
This 2005 Article IV Consultation highlights that Malta’s economic growth languished in 2004 for a fourth consecutive year. Slow growth reflected the weakness of, and increasing competition in, Malta’s export markets, as well as domestic factors. The slowdown had begun with shocks to the key sectors, and was reinforced by slow growth in Malta’s trading partners and by recent oil price rises. Although growth was weak, the fiscal balance was improved substantially in 2004, and parastatal reform gathered steam.
Malta has advanced toward accession to the European Union (EU), and its progress in international competition and fiscal deficit reduction has contributed to rapid growth and enhanced the economy's resilience to economic shocks. Executive Directors stressed the need for fiscal consolidation, strengthening of public finances, monetary, and exchange rate policies and the banking system. They welcomed the authorities' efforts in antimoney laundering and the combating of the financing of terrorism, and urged the authorities to criminalize the financing of terrorism.
Malta showed good economic performance in the past years, reflecting its strengthened policy, and a benign external environment. Executive Directors appreciated the fiscal consolidation and structural reforms, and noted that the country remained vulnerable to investment shocks and short-term capital flows. They emphasized that steps should be taken to secure fiscal deficit reduction in the short- and medium-terms, and also to strengthen the financial system, exchange rate regime, and monetary policy. They agreed that the country's database is adequate for surveillance, but requires further strengthening.