Economic Outline

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.

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