Economy

Economy

General description

The Maltese economy has grown modestly in recent years, with GDP growth at constant prices estimated at an average of 3.1 percent per annum during the years 2008 – 2011 except for 2009, when the economy contracted. The annual rate of inflation was 2.72% in 2011. Registered unemployed persons in May 2012 stood at 4.2%. Gainfully employed persons include a relatively high percentage in the public sector (27 percent as at May 2012). The government maintains an ongoing review of human-resources development in the public sector, aimed at improving systems and efficiency in public service. The Employment and Training Corporation (ETC) provides specialised training in various employment sectors in addition to its primary function as a recruitment agency. The Maltese economy is based on the free-enterprise system. While a major part of the economy is privately controlled, public utilities are mostly provided through government-controlled entities.

 

Manufacturing

The manufacturing sector accounts for 13% percent of Gross Value Added. Following the strong growth registered during 2007, total manufacturing turnover increased further in 2008. As expected, value added went down in 2009, but recovered again in 2010. Average full-time employment in the manufacturing sector was 19,875 in 2011, up by 2.5 per cent over the previous year. The local manufacturing industry continues to be characterised by a large number of micro firms (those with less than 10 employees). The larger firms, however, account for over 90 percent of total manufacturing output. Apart from ship repair and aircraft maintenance, the contributing manufacturing industries produce light consumer goods ,electronic and engineering components, and medical products. Electronics and high-tech industries are the fastest growing sector. Over 200 export-oriented foreign companies operate profitable manufacturing subsidiaries in Malta, benefitting from attractive incentives. In May 2004, with Malta’s accession to the European Union, goods produced in the EU, or goods that are already in free circulation in the EU, are exempt from the payment of customs duties, and only goods exported to non-EU countries are subject to the payment of export duties.

 

Tourism

The tourist industry is a major source of foreign-currency earnings. Overall, some 12 percent of employed persons are involved in tourism-related activities. Since the early 1990’s the number of tourist arrivals has exceeded one million per annum. Arrivals are predominantly from the United Kingdom, followed by Italy and Germany. During 2011, cruise passengers reached an all-time high of 556,564, up by 13.3 per cent over 2010. Malta projects itself as both a holiday and a cultural resort. It is also becoming increasingly popular as a venue for conferences and English-language study. A number of leading hotel chains in the five-star category are represented in Malta.

 

Service industries

Malta has strengthened and modernised the legislative framework regulating financial services. Over the past years Parliament has revised existing legislation and enacted new laws on banking and financial institutions, insurance, companies, trusts, financial services, shipping and taxation. Complemented by an efficient regulatory regime, including laws against money laundering, and supported by highly qualified human resources, ideal geographical location and efficient infrastructure, these measures have contributed towards the development of a modern and successful financial services centre. Malta is also a competitive yachting centre and a popular cruise-liner hub.

 

Transport and communications

Roads: Towns and villages, industrial and business centres, and holiday and leisure resorts are linked by an adequate road network. There are no highways, railroads or internal waterways. Malta boasts some of the finest natural harbours in the world. Extensive conventional and roll-on/roll-off services by national and international shipping lines carry freight and cargo from Malta directly to Mediterranean, north European, Middle Eastern and Asian ports. All factories are located within 30 minutes of a harbour and the airport.

The Freeport: The Malta Freeport Corporation embraces three prime activities namely, container handling, industrial storage and oil products handling. The corporation is recognised as a high profile transhipment hub and presently enjoys third place amongst all Mediterranean transhipment ports. It handles over one million TEUs per annum and has network connections to over 95 ports world-wide.

Air transport: Air connections with major European destinations are efficient and frequent. Twelve legacy carriers operate scheduled air services to 37 destinations. The national airline, Air Malta, operates regular scheduled flights to the major European cities—a total of over 45 direct destinations with 200 flights a week. Low-cost carriers are gaining in popularity, accounting for over 25 per cent of all departures. The Malta International Airport, which handles some 2.5 million passengers annually, is a modern, spacious and efficient terminal.

Postal services: Postal services are efficient and reliable. Letters to Europe normally take two days to reach their destination. For faster service the major international courier service companies operate to and from Malta. The Malta Post Office operates an Expedited Mail Service (EMS Datapost) with guaranteed delivery times.

 

Mineral and energy resources

Malta has few natural resources other than its geographical position, climate and adaptable labour force. Most of its industrial inputs and consumer goods are imported. Following seismic and geological analyses and studies, several onshore and offshore oil wells have been drilled but the quantities found were not deemed commercially viable so far.

 

Agriculture and fishing

Agriculture and fishing contribute less than 2% to Gross Value Added, although the share is higher in Gozo. Agriculture is beset by inherent constraints such as land fragmentation and scarcity of rainwater for irrigation purposes. Schemes are in place to improve the income of farmers and fishermen and thus preserve these traditional, indigenous activities. The development of fish farming for export is of recent origin.

 

Telecommunications

The telecommunications system has been upgraded according to plans drawn up by the International Telecommunications Union. International connections have been significantly expanded through satellite technology and a high-capacity fibre-optic cable linking Malta with Europe. A mobile cellular telephone service including GSM and a pager system are in place. Internet usage by enterprises stood at 95 per cent in 2011, while 75 per cent of households had access to internet at home.

 

Foreign trade and balance of payments

In a small island economy like that of Malta, increased export and domestic economic activity are automatically reflected in the level of imports. International trade activity results in visible trade imbalances. However, as a result of surpluses arising from services, principally tourism, and from net investment income from overseas, Malta generally ends up with a surplus on current account.

Similarly, net capital inflows have been invariably positive. Malta has a strong external reserves position, representing about eight months’ imports. Malta’s main trading partners are the members of the EU, which accounted for more almost 60 percent of exports and 69 percent of imports (of goods and services) in 2011.

 

Currency

Since 1 January 2008, the unit of currency is the euro (€).

 

*Source: PWC Report ‘Doing Business in Malta’ – October 2012