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Business and Economics > Public Finance

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Cover IMF Staff Country Reports
Malta: 2024 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. European Dept.
Malta has experienced strong growth over the past decade, primarily driven by export-oriented service industries, such as tourism and online gaming. Although growth is expected to moderate, it will remain among Europe’s highest in the near term, along with tight labor markets. Inflation has fallen to around 2 percent, but some inflationary pressures remain in the service sector. Strong growth has been supported by an influx of foreign workers and tourists, leading to increased density and strain on infrastructure and public services. This has raised concerns about the sustainability of the labor-intensive growth model. The financial system has demonstrated resilience amid successive shocks.
Keywords:
assessment tool; Customs organization structure; Malta tax; venture capital fund; currency of Malta; Policy recommendation; Labor markets; Energy prices; Europe; Global
Cover IMF Staff Country Reports
Malta: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Malta
International Monetary Fund. European Dept.
The 2023 Article IV Consultation highlights that Malta has experienced an impressive recovery from the pandemic and demonstrated resilience to shocks resulting from Russia’s invasion of Ukraine. The challenge for the medium term is to ensure a robust policy framework to foster strong, socially- and environmentally-sustainable, and inclusive growth. Risks to the outlook are tilted to the downside in part due to spillover effects from a possible escalation of Russia’s war in Ukraine or of the Israel–Gaza conflict, as well as a deeper-than-expected economic downturn in Europe. Domestically, wage and inflationary pressures could be higher and more persistent. On the upside, lower-than-expected commodity prices would help decelerate inflation, ease fiscal pressures, and boost growth. Key priorities include containing demand pressures by accelerating fiscal consolidation, exiting gradually from the current fixed energy price policy while protecting vulnerable groups, maintaining financial stability, and boosting structural reform efforts. Boosting productivity will be imperative to achieve strong, socially-and environmentally sustainable, and inclusive growth.
Keywords:
IMF staff calculation; government energy policy; SDDS preparation; lower-than-expected commodity price; anti-corruption framework; Energy prices; Inflation; External sector statistics; Global; Europe
Cover IMF Staff Country Reports
Euro Area Policies: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Euro Area; IMF Country Report No. 23/264
International Monetary Fund. European Dept.
The 2023 Article IV Consultation discusses that the euro area economy has shown remarkable resilience in the aftermath of Russia’s invasion of Ukraine and the largest terms of trade shock in several decades, thanks to a swift policy response and a strong rebound in contact-intensive services. Looking ahead, growth is expected to pick up gradually throughout 2023 and 2024, supported by a recovery in real incomes in the context of continued tight labor market conditions, a further easing of supply constraints, and firmer external demand, even as financial conditions continue to tighten. While headline inflation has fallen sharply recently after reaching record high levels, core inflation is proving more persistent. As tight financial conditions restrain demand and supply shocks dissipate further, inflation is set to decline further but is expected to remain elevated for an extended period. Renewed supply shocks, which could result from an escalation of the war in Ukraine and a related increase of commodity prices, or a further intensification of geoeconomic fragmentation, would also push up inflation and hurt growth. On the upside, the economy could again prove more resilient than expected, especially amid a still large stock of excess savings.
Keywords:
Euro area headline inflation; inflation expectation; EU climate investment fund; EU AML authority; EU institution; EU bank; core inflation; EU economy; Inflation; Energy prices; Fiscal stance; Monetary tightening; Global; Europe
Cover IMF Staff Country Reports
Malta: 2022 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. European Dept.
The 2022 Article IV Consultation with Malta explores that Malta’s economy has recovered strongly following the worst recession in decades due to the coronavirus disease 2019 pandemic. Malta’s economic recovery from the pandemic is remarkable, but the indirect impact of Russia’s war in Ukraine weighs on the outlook. The strong economic recovery continued into 2022, driven by high net exports and consumption. Gross domestic product growth is, however, set to slow in 2023 as the confluence of global shocks weighs on the economy. Inflation is expected to gradually decline but remain elevated. Risks to the outlook are tilted to the downside, mainly because the growth slowdown in Europe could be deeper than expected. The financial system remains sound, but emerging risks warrant continued vigilance and close monitoring of banks. The authorities should closely monitor banks’ risk management to ensure that provisions are continuously updated as economic prospects change. Structural reforms are necessary to improve Malta’s long-term growth and address climate challenges. On climate change policy, concerted efforts involving all stakeholders should continue to implement the 2021 Low Carbon Development Strategy and seek decarbonization potential by exploiting various sources, including investing in renewable sources.
Keywords:
SDDS preparation; money market rate; liability positions vis-à-vis nonresident; Policy recommendation; property price index; External sector statistics; Energy prices; Inflation; Global; Europe
Cover IMF Staff Country Reports
Malta: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Malta
International Monetary Fund. European Dept.
The fallout from the COVID-19 crisis has hit the Maltese economy hard, particularly its large tourism sector. Using fiscal buffers accumulated prior to the pandemic, the authorities have taken swift actions to support households, businesses, and the healthcare system. With the rapid rollout of COVID-19 vaccine, the economy has reopened for the summer tourism season. While the outlook is surrounded by a high degree of uncertainty, the Maltese economy is expected to rebound by 5¾ percent this year, up from -7¾ percent in 2020. The financial system has remained stable. In late June 2021, the Financial Action Task Force (FATF) put Malta under increased monitoring due to concerns about effectiveness of its anti-money laundering and combatting the financing of terrorism (AML/CFT) framework.
Keywords:
stimulus measure; policy direction; SDDS preparation; liability positions vis-à-vis nonresident; pandemic crisis; per-capita emissions level; money market rate; IMF staff calculation; Anti-money laundering and combating the financing of terrorism (AML/CFT); COVID-19; External sector statistics; Tourism; Global
Cover IMF Staff Country Reports
Malta: 2020 Article IV Consultation-Press Release and Staff Report
International Monetary Fund. European Dept.
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.
Keywords:
ISCR; CR; healthcare spending; authorities' prompt; SDDS preparation; government; spending; IMF staff calculation; flights to Malta; growth performance; Anti-money laundering and combating the financing of terrorism (AML/CFT); Public investment and public-private partnerships (PPP); Fiscal stance; Income; Global; Europe
Cover IMF Staff Country Reports
Malta: Financial Sector Assessment Program-Technical Note-Bank Resolution and Crisis Management
International Monetary Fund. Monetary and Capital Markets Department
This technical note analyzes laws, policies, and procedures for bank failure mitigation and resolution, and for preparation and management of a financial crisis in Malta. It addresses the supervision of bank recovery plans, early intervention when problems are identified, resolution planning, resolution funding, and deposit insurance. Implementation of recovery planning requirements for banks remains a work in progress. Written policies and procedures should be adopted on the application of early intervention powers. While legal triggers and power for early intervention in problem banks are adequate, the powers in relevant legislation overlap substantially. Actions are needed to support the use of bank resolution powers, and to address weaknesses in the bank liquidation and insolvency framework. There is lack of clarity regarding the legal regime applicable to bank winding-up and insolvency, including as to the creditor hierarchy in liquidation. Impediments to implementation of the resolution tools are being identified and need to be addressed. Preparations need to be made for using the bridge institution resolution tool.
Keywords:
ISCR; CR; insolvency proceeding; bank insolvency regime; recovery plan; agent bank; bank Reorganization; public notice; risk management; central bank; insolvency regime; resolution power; insolvent bank; bank insolvency case; bank liquidation estate; bank failure; bank insolvency framework; Bank resolution framework; Legal support in revenue administration; Bank resolution; Crisis management; Bank solvency
Cover IMF Staff Country Reports
Malta: Financial Sector Assessment Program-Technical Note-Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)
International Monetary Fund. Monetary and Capital Markets Department
This technical note on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) for the Malta summarizes the findings of a targeted review of several aspects of Malta’s progress in addressing AML/CFT vulnerabilities in the financial sector, specifically the banking sector. The report recommends that while Malta has strengthened AML/CFT requirements for banks in recent years, the implementation of AML/CFT preventive measures should be improved further. Although important milestones have been implemented by the Financial Intelligence Analysis Unit and Malta Financial Services Authority to enhance AML/CFT supervision since mid-2017, recent AML/CFT violations raise doubts as to their capacity to effectively identify and address AML/CFT compliance breaches. A multiprong strategy is needed to address these deficiencies. The focus needs to be on developing more effective AML/CFT enforcement and ensuring that banks apply appropriate preventive measures in relation to their high-risk activities and clients. AML/CFT supervision needs to more stringently evaluate banks’ risk mitigation models, ensure that customer due diligence requirements are properly followed, and apply corrective actions and sanctions when deficiencies are identified.
Keywords:
ISCR; CR; authority; bank; proceeds; Malta; TF risk; CFT violation; CFT compliance examination; CFT requirements; CFT authorities; CFT supervision; CFT policy; CFT supervisor; CFT oversight; CFT review; Anti-money laundering and combating the financing of terrorism (AML/CFT); Legal support in revenue administration; Financial Sector Assessment Program; External balance assessment (EBA); Europe
Cover IMF Working Papers
The Structural Determinants of the Labor Share in Europe
Dilyana Dimova
The labor share in Europe has been on a downward trend. This paper finds that the decline is concentrated in manufacture and among low- to mid-skilled workers. The shifting nature of employment away from full-time jobs and a rollback of employment protection, unemployment benefits and unemployment benefits have been the main contributors. Technology and globalization hurt sectors where jobs are routinizable but helped others that require specialized skills. High-skilled professionals gained labor share driven by productivity aided by flexible work environments, while low- and mid-skilled workers lost labor share owing to globalization and the erosion of labor market safety nets.
Keywords:
WP; skilled worker; import penetration; employment share; further labor share erosion; labor market; labor share erosion; labor share shrinkage; labor share stagnation; share data; share decline; wage share; labor share; technology; employment policies; globalization; shift share analysis; labor share contraction; labor share growth; labor share shrink; labor share stem; self-employment share; labor share come; labor share tend; labor share fluctuation; Employment; Employment protection; Unemployment benefits; Global; Baltics; Europe
Cover IMF Staff Country Reports
Malta: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Malta
International Monetary Fund. European Dept.
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.
Keywords:
ISCR; CR; government; staffs assessment; staff complement; GDP; benchmark revision; IMF staff calculation; government contribution; Fiscal stance; Anti-money laundering and combating the financing of terrorism (AML/CFT); Income; Public investment and public-private partnerships (PPP); Global; Europe