Until 1800, Malta had very few industries except cotton, tobacco and shipyards. The shipyards, situated in the natural harbours around its oldest cities, including the capital city Valletta, were used by the British for military purposes. At times of war, Malta’s economy prospered due to its strategic location.
In 1869, the opening of the Suez Canal benefited Malta’s economy greatly as there was a huge increase in the shipping which entered the port. In 1988, the Malta Freeport was established and is now a major maritime transhipment logistic centre in the Mediterranean region.
The old naval dockyards used by the British were then converted to operate as a commercial shipyard. Malta has developed close economic links with Libya, which in turn has invested heavily in property and commerce on the island as well as supplying the bulk of the oil that meets the island’s energy needs. France has become the principal market for exports, followed by the USA, Germany, Singapore, the UK and Italy.
In the four decades since its independence, Malta’s leaders have laid the foundations for a sustainable economy based on tourism, industry and services. The agricultural sector is small, with potatoes being the only major export commodity. Although Malta is an island, the fishing industry is also relatively insignificant. Malta produces only about 20% of its food needs, has limited freshwater supplies, and has no domestic energy sources.
As the island’s main economic resources are its geographic location and its productive, educated labour force, the country’s economy is primarily driven by service-based industries, including foreign direct investment in technology. The economy is dependent on foreign trade (serving as a freight trans-shipment point), manufacturing (especially electronics), legal and accounting services, telecommunications shipping, aviation, gaming and financial services. These activities have been the main driving forces behind Malta’s economic growth, along with the traditional sectors such as tourism, retail and wholesale trade.
Malta joined the EU during the 2004 enlargement along with nine other countries. Since joining the EU in 2004, Malta has been focusing on economic growth along with the idea of promoting a competitive market. Indeed, in comparison with the economic conditions before the 2008 economic crisis, the post crisis era has witnessed an increase in the amount of new jobs. Moreover, the progression towards economic diversity has significantly lowered capital and import intensity. During the economic crisis, Malta’s banks remained resilient due to the conservative, risk-averse strategy undertaken by the banks in the course of their business.
The Maltese government entered the ERM II framework in May 2005, and has adopted the Euro as the country’s currency on 1 January 2008. Furthermore, in December 2007 Malta has successfully lifted all border controls and checks between the Schengen Member States.
The Government of Malta has undertaken a long-term strategic plan intended to keep Malta at the forefront of the information technology and telecommunications sector in Europe.
Malta’s banking system is regulated by the Malta Financial Services Authority. On 1 May 2004 the Central Bank of Malta joined the European System of Central Banks (ESCB) and on 1 January 2008 it became part of the Eurosystem. The main objective of the Eurosystem and the Central Bank of Malta is to maintain price stability. In order to meet this objective, the Central Bank of Malta participates in the preparation and decision-making process of the Eurosystem’s monetary policy.
MALTA’S ECONOMY IN NUMBERS
Population: 434,403 (as it stood at the end of 2015)
Sovereign Rating: A (Fitch, 2016), A- (Standard & Poor’s 2016), A3 (Moody’s 2016)
Total GDP (EUR) estimate: €2,277.6 million (as at 2nd quarter of 2016)
GDP per capita (EUR): 20,415 (as at 2015)
GDP Growth in real terms: 6.4% (as at 2015)
GDP Composition by sector: Agriculture 1.4%; Industry 15.5%; Services 83.1%
Unemployment 4.9% (as at 2nd quarter of 2016)
Inflation Rate as measures by the Retail Price Index: 0.78% (as at September 2016)
Inflation rate (12-month moving average): 0.74% (as at September 2016)
Accounting Standards: IFRS and GAPSME
Registered unemployed (as at 2015): males: 6,657, females: 3,949
Labour supply (as at 2nd quarter 2016): 191,384 accounting for more than half the population aged 15 and over.
Internet use by enterprises (2015): 97.8%
Internet use by individuals (2015): 78%