2025 was a relatively good year for the Maltese economy but government finances seem to have taken a step back. The government was successfully reducing the deficit by increasing tax revenues and next year aims to get closer at cutting off the deficit completely. However, this year, government finances broke the positive trend. At the same time, Malta had the highest economic growth in the EU and this growth is set to continue but at a slower pace.
Some basic context should be provided to this figure because the Prime Minister has repeatedly said that the economy in Malta is doing much better than bigger European countries where they face budget cuts such as in the UK and France. Germany was also mentioned once as the largest European economy creeped towards recession.
Malta has an economy based on cheap labour and low productive jobs and economic growth in Malta is being backed by volume and not enhanced productivity per capita. This trend is reflected in the higher number of tourists coming to Malta and rising consumption figures.
However, Malta has systematic issues which will bleed its economy dry if they are not addressed immediately. The Labour government is not addressing these structural issues because it wants to deceive itself and the public with the illusion that overall everything is fine and there is nothing to worry about. There are issues which need to be addressed and gross irresponsibility today, will lead to a bigger price paid tomorrow.
The Minister for Finances has always prided in projecting himself as the most responsible politician on finances – however even Minister Clyde Caruana is in public denial over these structural issues.
Malta has a problem with inflation and especially food inflation. This issue is not cyclical – it is secular and it will compound over the years biting at the cost of the living. There are no solutions and discussions to address this issue.
Malta has another problem with energy and fuel prices which it is subsidising at the coast of up to €200 million every year. There is also no solution for this. The plan is continue subsidising expensive electricity from the European grid indefinitely.
Malta also has a housing crisis. The government has introduced tax incentives to address this problem but structurally this problem will persist and grow extensively. In the backdrop of the housing crisis there is also growing inequality.
2024 was a record year and 2025 cooled off a bit. Malta also has a problem with the manufacturing industry which is increasingly becoming less competitive especially due to US tariffs. This problems affects the over-solutions that Malta needs to increase labour-productivity and move away from a cheap labour economy.
Malta’s economy is not in trouble and it looks as if it will continue on its growing pace but the structural problems afflicting can eventually become existential.
Website Editor
Historian and Publisher
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