Economy of Malta

Economy - overview:

Major resources of Malta are limestone, a favorable geographic location, and a productive labor force. Malta produces only about 20% of its food needs, has limited freshwater supplies, and has no domestic energy sources. The economy is dependent on foreign trade, manufacturing (especially electronics and textiles), and tourism; the state-owned Malta drydocks employs about 3,800 people. In 1999, over 1 million tourists visited the island. Per capita GDP of $13,800 places Malta in the ranks of the less affluent EU countries. The island has joined the EU in 2004 despite having been the divided politically over the question earlier. The sizable budget deficit remains a key concern.

Economy - in greater depth

Possessing few indigenous raw materials and a very small domestic market, Malta has based its economic development on the promotion of tourism and labor-intensive exports. Since the mid-1980s, expansion in these activities has been the principal engine for strong growth in the Maltese economy. Investment in infrastructure since 1987 has stimulated an upswing in Malta's tourism economic fortunes.

Tourist arrivals and foreign exchange earnings derived from tourism have steadily increased since the 1987 watershed, in which there was growth from the previous year of, respectively, 30% and 63% (increase in terms of U.S. dollars). Following September 11, 2001 Terrorist Attack, the tourist industry has suffered some setbacks.

With the help of a favorable international economic climate, the availability of domestic resources, and industrial policies that support foreign export-oriented investment, the economy has been able to sustain a period of rapid growth. During the 1990s, Malta's economic growth has generally continued this brisk pace. Both domestic demand (mainly consumption) boosted by large increases in government spending, and exports of goods and services contributed to this favorable performance.

Buoyed by continued rapid growth, the economy has maintained a relatively low rate of unemployment. Labor market pressures have increased as skilled labor shortages have become more widespread, despite illegal immigration, and real earnings growth has accelerated.

Growing public and private sector demand for credit has led -- in the context of interest rate controls - to credit rationing to the private sector and the introduction of noninterest charges by banks. Despite these pressures, consumer price inflation has remained low, reflecting the impact of a fixed exchange rate policy and lingering price controls.

The Maltese Government has pursued a policy of gradual economic liberalization, taking some steps to shift the emphasis in trade and financial policies from reliance on direct government intervention and control to policy regimes that allow a greater role for market mechanisms. However, by international standards, the economy remains highly regulated and continues to be hampered by some longstanding structural weaknesses.

There is a strong manufacturing base for high value-added products like electronics and pharmaceuticals, and the manufacturing sector has more than 250 foreign-owned, export-oriented enterprises. Tourism generates 35% of GDP, with Malta attracting more than 1.2 million visitors in 2000.

In 2000 the economy grew by 7% in nominal terms and 4.3% in real terms. Unemployment was down to 4.4%, its lowest level in 3 years. Many formerly state-owned companies are being privatized - and the market liberalized.

Fiscal policy is now directed toward bringing down the budget deficit. Public debt grew from 24% of GDP in 1990 to 56% in 1999. The target is a deficit-to-GDP ratio of around 3% in 3 years. In 2000 deficit-to-GDP ratio was 6.6% of GDP, down from 11% last year.

Economy in figures

GDP: purchasing power parity - $5.3 billion (1999 est.)

GDP - real growth rate: 4% (1999 est.)

GDP - per capita: purchasing power parity - $13,800 (1999 est.)

GDP - composition by sector:
agriculture: 3%
industry: 26%
services: 71% (1997 est.)

Population below poverty line: NA

Household income or consumption by percentage share:
lowest 10%: NA
highest 10%: NA

Inflation rate (consumer prices): 1.8% (1999 est.)

Labor force: 143,700 (October 1997)

Labor force - by occupation: industry 24%, services 71%, agriculture 5% (1999 est.)

Unemployment rate: 5.5% (September 1999)

Budget:
revenues: $1.32 billion
expenditures: $1.76 billion, including capital expenditures of $NA (1998 est.)

Industries: tourism; electronics, ship building and repair, construction; food and beverages, textiles, footwear, clothing, tobacco

Industrial production growth rate: NA

Electricity - production: 1,620 GWh (1998)

Electricity - production by source:
fossil fuel: 100%
hydro: 0%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 1,507 GWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: potatoes, cauliflower, grapes, wheat, barley, tomatoes, citrus, cut flowers, green peppers; pork, milk, poultry, eggs

Exports: $1.8 billion (f.o.b., 1998)

Exports - commodities: machinery and transport equipment, manufactures

Exports - partners: France 20.7%, US 18.1%, Germany 12.6%, UK 7.7%, Italy 4.8% (1998)

Imports: $2.7 billion (f.o.b., 1998)

Imports - commodities: machinery and transport equipment, manufactured goods; food, drink, and tobacco

Imports - partners: Italy 19.3%, France 17.8%, UK 12.4%, Germany 10.5%, US 8.9% (1998)

Debt - external: $130 million (1997)

Economic aid - recipient: NA

Currency: 1 Maltese lira (LM) = 100 cents

Exchange rates: Maltese liri (LM) per US$1 - 0.4086 (January 2000), 0.3994 (1999), 0.3885 (1998), 0.3857 (1997), 0.3604 (1996), 0.3529 (1995)

Fiscal year: 1 April - 31 March

See Also

• Economy of Europe
• Malta