Economy of Malta

Economy of Malta

Valletta, Malta
Currency	Euro (EUR)[1]
Fiscal year	Calendar year
Trade organisations	EU, WTO, Commonwealth and the OSCE
Statistics
GDP	$11.22 billion (PPP, 2013 est.)
GDP growth	2.4% (Real, 2013 est.)
GDP per capita	$29,200 (PPP, 2012 est.)
GDP by sector	Agriculture: 1.4%; Industry: 11.4%; Services: 87.2% (2015 est.)[2]
Inflation (CPI)	1.0% (CPI, 2013 est.)
Population below poverty line	15.1% (2012)
Gini coefficient	27.1 (2012)
Labour force	190,400 (2013 est.)
Labour force by occupation	Public Administration: 26.6% Trade, Transport, Accommodation & Food: 28.6% Manufacturing & Industry: 15.7% Professional, Scientific & Technical: 7.7% Construction: 5.6% Financial & Insurance: 4.4% Agriculture & Fishing: 1.6% Information & Communication: 3.5% Other Services: 5.6% (2014 est.)[3]
Unemployment	5.9% (02.2015)[4]
Average gross salary	€1,355.58 monthly (2014)[5] €16,267 yearly (2014)[5]
Main industries	Tourism, electronics, ship building and repair, construction, food and beverages, pharmaceuticals, footwear, clothing, tobacco, aviation services, financial services, information technology services
External
Exports	$4.938 billion (2014 est.)
Export goods	Machinery and mechanical appliances, mineral fuels, oils and products, pharmaceutical products, printed books and newspapers, aircraft and parts, toys, games and sports equipment
Main export partners	Germany 18.1%  Libya 10.2%  France 8.6%  United Kingdom 7.3%  Italy 5.9%  Turkey 5.9%  Greece 5.1%  China 4.3% (2014 est.)[6]
Imports	$8.384 billion (2014 est.)
Import goods	Mineral fuels, oils and products, electrical machinery, aircraft and parts, machinery and mechanical appliances, plastic and other semi-manufactured goods, vehicles and parts
Main import partners	Italy 19.3%  United Kingdom 10.3%  Germany 8.2%  France 7.1%  China 5.8%  Greece 5.0%  Spain 4.8%  Netherlands 3.7% (2014 est.)[7]
FDI stock	$15.17 billion (31 June 2013)
Gross external debt	$5.241 billion (2013 est.)[8]
Public finances
Public debt	63.9% of GDP (2015 est.)[9]
Revenues	$4.843 billion (2013 est.)
Expenses	$4.322 billion (2013 est.)
Credit rating	Standard & Poor's: BBB+ (Domestic) BBB+ (Foreign) AAA (T&C Assessment) Outlook: Stable[9] Moody's: A3 Outlook: Positive[10] Fitch: A Outlook: Stable[11]
Foreign reserves	$377 million (31 December 2013)
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars.

Malta is a highly industrialised, service based economy. It is classified as an advanced economy by the International Monetary Fund^[12] and is considered a high income country by the World Bank^[13] and an innovation-driven economy by the World Economic Forum.^[14] It is a member of the European Union and of the eurozone, having formally adopted the euro on 1 January 2008.^[15]

The strengths of the economy of Malta are its strategic location, being situated in the middle of the Mediterranean Sea at a crossroads between Europe, North Africa and the Middle East, its fully developed open market economy, multilingual population (88% of Maltese people speak English),^[16] productive labour force, low corporate tax^[17] and well developed finance and ICT clusters. The economy is dependent on foreign trade, manufacturing (especially electronics), tourism and financial services. In 2014, over 1.7 million tourists visited the island.^[18]

Malta's GDP per capita, adjusted by purchasing power parity, stands at $29,200^[19] and ranks in 15th place in the list of EU countries in terms of purchasing power standard.^[20] In the 2013 calendar year, Malta recorded a budget deficit of 2.7%,^[21] which is within the limits for eurozone countries imposed by the Maastricht criteria, and Government gross debt of 69.8%.^[22] At 5.9%, Malta has the sixth lowest unemployment rate in the EU.^[23]

Malta is the 15th most democratic country in the world according to the Economist Intelligence Unit's Democracy Index.

History

During the Napoleonic Wars (1800–1815), Malta's economy prospered and became the focal point of a major trading system. In 1808, two-thirds of the cargo consigned from Malta went to Levant and Egypt. Later, one-half of the cargo was usually destined for Trieste. Cargo consisted of largely British and colonial-manufactured goods. Malta's economy became prosperous from this trade and many artisans, such as weavers, found new jobs in the port industry.

In 1820, during the Battle of Navarino, which took place in Greece, the British fleet was based in Malta. In 1839, the Peninsular and Oriental Steam Navigation Company and East India Companies used Malta as a calling port on their Egypt and Levant runs.

In 1869, the opening of the Suez Canal benefited Malta's economy greatly as there was a massive increase in the shipping which entered in the port. The economy had entered a special phase. The Mediterranean Sea became the "world highway of trade" and a number of ships called at Malta for coal and various supplies on their way to the Indian Ocean and the Far East.

From 1871 to 1881, about 8,000 workers found jobs in the Malta docks and a number of banks opened in Malta. By 1882, Malta reached the height of its prosperity.

However, the boom did not last long. By the end of the 19th century, the economy began declining and by the 1940s, Malta's economy was in serious crisis. This was primarily due to the invention of large ships which had become oil-fired and therefore had no need to stop in the Grand Harbour of Malta to refuel. The British Government had to extend the dockyard.

At the end of World War II, Malta's strategic importance had reached a low point. Modern air warfare technology and the invention of the atomic bomb had changed the importance of the military base. The British lost control of the Suez Canal and withdrew from the naval dockyard, transforming it for commercial shipbuilding and ship repair purposes.

Modern economy

The Maltese economy is dependent on foreign trade, manufacturing (especially electronics and pharmaceuticals), and tourism. Economic recovery of the European economy has lifted exports, tourism, and overall growth. Malta adopted the euro on 1 January 2008.

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 the September 11 attacks, the tourist industry suffered a temporary setback.

With the help of a favourable 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. Labour market pressures have increased as skilled labour 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 (2.2% according to the Central Bank of Malta 2nd Quarterly Report in 2007), reflecting the impact of a fixed exchange rate policy (100% hard peg to the euro, in preparation for currency changeover) and lingering price controls.

The Maltese Government has pursued a policy of increased economic freedom and privatisation, taking some steps to shift from reliance on government intervention to allowing a greater role for free market mechanisms. While change has been substantial, the economy remains regulated.

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 around 15% of GDP. Film production in Malta is another growing industry (approx. 35 million euros between 1997 and 2011), despite stiff competition from other film locations in Eastern Europe and North Africa, with the Malta Film Commission providing support services to foreign film companies for the production of feature cinema (Gladiator, Troy, Munich, Count of Monte Cristo and World War Z, amongst others, were shot in Malta over the last few years), commercials and television series.^[24]

Over the period 2001-2004 the mean GDP real growth was 0.4%^[25] due to Malta losing pace in tourism and other industries. 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 has been directed toward bringing down the budget deficit after public debt grew from a negative figure in 1988 to 56% in 1999 and 69.1% in 2009.^[26] By 2007, the deficit-to-GDP ratio was comfortably below 3% as required for eurozone membership, but due to pre-election spending has gone up to 4.4% in 2008 and 3.8% in 2009.^[26]

Energy

Despite a great potential for solar and wind power,^[27] Malta produces almost all its electricity from oil, importing 100% of it.^[28]

Energy and the cost of energy, which is oft-quoted as the highest in Europe, was a key issue in the 2013 election.^[29]

Industry

Statistics

Electricity - production: 1,620 GWh (1998)

Electricity - production by source:
fossil fuel: 98.6%
hydro: 0%
nuclear: 0%
Renewable sources: 1.4%
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

Currency: 1 euro = 100 cents since 1 January 2008
previously 1 Maltese lira = 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) Irrevocably fixed conversion rate to the euro: Maltese liri (LM) per EUR1 - 0.4293 (2007)

Poverty

Poverty and social exclusion are problems in Malta but the situation is not orse than in the rest of the European Union.^[31] 15% of Malta’s citizens were living beneath the poverty line as of 2008. According to resarch done by the Jesuit Centre for Faith and Justice, people with gambling, alcohol, and drug problems, single parents, and people aged over 65 are not always noticed when thinking of Malta’s poor.^[32] To address the issue of poverty, on December 24, 2014 Malta addressed poverty in the six branches of social services, health and environment, culture, income and social benefits, education and employment, by unveiling the National Strategic Policy for Poverty Reduction and Social Inclusion; this will stay in effect from 2014 to 2024.^[33] Under this policy, stakeholders will be involved in the discussion of how to reduce hardships experienced by families living in Malta.^[34]

Unemployment system

Benefits for unemployment are given out based on contributory and non-contributory schemes. Contributory schemes distribute unemployment benefits within 50 weeks of contribution. Non-contributory schemes a Social Unemployment Benefit is granted after a mean test to the head of a household. In order to qualify for unemployment benefits, a person must be able to do work and registered as unemployed.^[35] There are three categories to the Malta registrar of unemployment. People who have never worked fall into category one. Those who quit or were fired fall into category two. Category three is for people who are currently employed but are looking for other job prospects. Benefits for unemployment are given for 156 days after which a person may qualify for the mean tested unemployment assistance.^[36] People eligible for unemployment benefits are Malta citizens who are 16 years or older, people signed up for eligible work-study programs, and citizens outside of Malta who are employed by foreign entities.^[37]

Pensions System

Malta has public and private pension systems. There are two types of contributions for the public pension system: class one and class two. Employed people contribute to class one and those are are self employed contribute to class two.^[38] There was a gradual increase in eligible age to collect pensions in Malta in the 1950s and 1960s; for example, someone who was born in 1953 needs to be 62 years old in order to collect pensions while another person born in 1960 has to be 64 years old in order to collect pensions.^[39] Another requirement to qualify for a Malta pension program is that a person must have been contributing to the program for a certain time period or they will not be eligible.^[40]

See also

• Tourism in Malta
• Industry in Malta
• Gambling in Malta
• Agriculture in Malta
• Science and technology in Malta
• Fishing industry in Malta
• List of companies of Malta
• Economy of Europe
• General Retailers and Traders Union

References

Member states of the European Union
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