The Maltese tourism sector requires more effective management, the International Monetary Fund said in a report published on Monday in which they discussed the preliminary findings of its visit, or mission, to Malta.
It stated that with numerous hotel projects underway along with a rise in other types of accommodation, tourism in Malta may continue to grow significantly and could potentially exacerbate labour shortages, infrastructure bottlenecks, and social as well as environmental concerns. It added that there should be a focus on implementing the Malta Tourism Strategy 2021-2030, “which aims to promote sustainable and high-quality tourism”.
The IMF is an organisation that operates with the aim of achieving sustainable growth and prosperity for its member countries. It describes itself as doing so by supporting economic policies that promote financial stability and monetary cooperation.
Going over Malta’s economic growth, the IMF said that Malta has experienced remarkable growth over the past decade, but that “growth is expected to moderate”. Having said that, it commented that IMF staff anticipate that Malta’s growth will remain among Europe’s highest. It added that this strong growth has been supported by an influx of foreign workers and tourists, “leading to increased population density and strain on infrastructure”.
On the matter of Malta’s economic growth moderating from high levels, the IMF said that growth is projected to decelerate from 7.5% in 2023 to 5% in 2024 and then 4% in 2025. It said that exports, including tourism, are expected to slow “but continue to be robust”. It continued that beyond 2025, “medium-term growth is projected to stay around 4%,” which it said is down from an average of 6.75% over the past decade, “due to a moderation in tourism demand, the maturing gaming sector, and a decline in net immigration inflows”.
It said that some policy priorities include the phasing out of fixed energy price policies and reallocating the resulting fiscal space for investment and productivity-enhancing policies, safeguarding financial stability by closely monitoring risks that could arise from banks’ concentrated lending to the real estate sector, and further development and implementation of the productivity-driven growth strategy which emphasises innovation, digitalisation, education, training, and environmental stability.
Delving into the labour market, the IMF commented that it “remains tight, with some inflationary pressures”. It said that employment has grown fast while the unemployment rate remains at historic lows, with foreign workers accounting for the majority of the increase. It added that wage pressures have “remained relatively contained… partly due to increased inflows of foreign workers”. It continued that although inflation has fallen, pressures in the service sector persist, though IMF staff expects inflation to stabilise at 2% by mid-2025.
The IMF stated that key external risks include “the escalation of the conflict in the Middle East and of Russia’s war in Ukraine and a deepening geoeconomic fragmentation”. It said that these external factors could lead to sharply higher global energy and commodity prices. Pivoting to domestic risks, it said that wage growth and inflation may be higher than expected, but that “on the upside, stronger-than-expected tourism exports would boost growth”.
It described the 2025 Budget as aiming to reduce the overall deficit from 4% of GDP in 2024 to 3.5% in 2025. “Revenue losses due to upward adjustments to personal income tax brackets for past inflation are more than offset by containing increases in compensation of employees and subsidies,” the IMF said. It commented that “tightening fiscal policy is cyclically appropriate”. It continued that the Maltese authorities expect the overall deficit to decline to 2.6% of GDP by 2027 in adherence to the net expenditure growth ceilings under the European Union’s new fiscal rules. It added that general government debt is projected to remain around 50% of GDP through 2027.
With that said, the IMF commented that fiscal consolidation should focus on shifting policy away from energy subsidies and toward investment and innovation for long-term sustainable growth. It said that energy subsidies are projected to decline from a peak of 1.75% in 2022 to 0.75% in 2025 due to lower global energy prices. Despite this, they still account for 20% of the fiscal deficit, the IMF explained. It said that the Maltese authorities should gradually but decisively exit the current fixed energy price policy by shifting to more targeted subsidies and strengthening market pricing mechanisms, as this would reduce fiscal risks associated with energy price shocks and enhance incentives for energy conservation while also helping to accelerate the green transition.
It advised that strengthening revenue administration and expenditure efficiency is critical for fiscal consolidation, and added that the authorities’ long-term development vision should be reflected in fiscal planning. The IMF spoke of the government’s launching of ‘Malta Vision 2050’, which aims “to establish the country’s long-term strategic direction”. The IMF said that this vision focuses on infrastructure, innovation, education, health, and environmental stability, and continued that “developing a long-term fiscal framework is essential for strengthening policy decision-making and aligning fiscal planning with strategic priorities”.
Going over structural reforms, the IMF said that the promotion of high-productivity economic activity and innovation is essential for sustainable long-term growth. It commented that public and private spending on research and development in Malta is low, and added that authorities should continue evaluating the effectiveness of schemes such as grants, tax incentives, and loan guarantees as a means of supporting innovation activities.
Focusing on digitalisation and further on innovation, the IMF said that such efforts require a workforce “equipped with the right skills”. It said that Malta “excels in digitalisation and is well-positioned to harness the benefits of AI”, but there are significant shortages of highly skilled workers. It added that while digital technologies such as AI can enhance productivity, “they may also lead to job displacement”. With that in mind, the IMF suggested that the focus should continue to be on improving educational outcomes, increasing STEM enrollment, enhancing digital skills, and boosting adult learning uptake. “Robust implementation of the National Education Strategy 2024-2030 and the Lifelong Learning Strategy 2023-30 is critical.”
It said that concerted efforts from both the public and private sectors are essential in order to achieve Malta’s “ambitious climate goals”.
The IMF concluded by thanking the private sector and authorities such as the Central Bank of Malta and the Ministry for Finance for their assistance in logistical support for conducting the report.
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