Economic Outline

Economic Indicators

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 and thus is sensitive to its external environment. Between 2014 and 2023, growth averaged 6.75%, the second-highest rate in Europe. Output growth is expected to slow from 7.5% in 2023 to 5% in 2024 and 4% in 2025, still among the highest in Europe. Over the medium term, Malta’s economy is projected to continue outperforming other European countries, although structural constraints will limit growth potential. The IMF estimates medium-term growth at 4%, well above the EU average but below the pre-pandemic average. This reflects lower global growth prospects and the maturing of the gaming sector, which had previously driven Malta’s growth. Growth in labour-intensive industries, particularly tourism, may also slow as the authorities adopt a more targeted immigration policy.

Malta’s public finances have been significantly consolidated in recent years, with the government budget turning positive. However, in the last few years, national authorities had to deploy a series of measures to mitigate the effects of the pandemic and high energy and food prices, resulting in an increase in budget deficits (4.1% in 2023 and 4.6% last year, as per the IMF). The 2025 budget aims to reduce the fiscal deficit to 4% of GDP, with lower revenue offset by reduced spending as a share of GDP. Key measures include: a projected decline in income tax revenue by about ½% of GDP due to an upward adjustment of personal income tax brackets for inflation; a decrease in capital and other current revenues; a reduction in employee compensation following one-off retroactive payments related to recent public wage settlements; and a decline in subsidies, including energy, due to lower global energy prices despite fixed retail energy prices. Capital spending is also expected to temporarily decrease due to lower EU fund disbursements. Similarly, the debt-to-GDP ratio increased to 47.7% in 2024 from 47.3% one year earlier and is projected to follow an upward trend over the forecast horizon, landing at 48.7% by 2026 (IMF), as sizeable fiscal deficits should be partially offset by continued strong nominal GDP growth. While goods inflation has dropped below 2% in 2024, inflationary pressures persist in services, particularly in transport and tourism-related sectors where demand remains strong. The rate is expected to stabilize around 2% by mid-2025 (IMF).

Unemployment in Malta continues to be among the lowest in the EU, with a continuous decrease in unemployment for all age groups and categories in recent years. According to the EU Commission, employment grew by 4.3% in 2024, driven by high immigration flows to address the intense labour and skills shortages in the domestic market. While employment growth is expected to decelerate, it will remain strong at 3.1% in 2025 and 2.8% in 2026. The unemployment rate stayed low at 3.2% in 2024 and is projected to drop marginally to 3% by 2026. However, high employment growth in low-paid sectors is expected to keep nominal wage growth per employee modest throughout the forecast period, rising slightly above projected inflation. Overall, the country's GDP per capita (PPP) was estimated at USD 72,941 in 2024 by the IMF, above the EU average. Nevertheless, 19.8% of the Maltese population was at risk of poverty and social exclusion in 2023, according to the latest data by Eurostat.

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