National Strategic Reference Framework

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MALTA – National Strategic Reference Framework 2007-2013 Draft Document for Consultation financial intermediation, accounting for some 100 licensed investment services providers. Today, the amount of investment funds under management tops the Euro 1 billion mark. The financial services sector accounts for around 12.0 per cent of Malta’s GDP and is considered to be one of Malta’s key growth areas. Employment in the sector has grown to around 5,500 and financial services are now fast becoming an attractive career proposition for well-trained, highly motivated graduates and support personnel. The construction industry has always been considered one of the significant drivers of Maltese economic activity, as it represents a high degree of local value added with a significant multiplier factor. National infrastructure programmes have provided a considerable impetus to the sector in recent years, namely the new hospital project as well as a number of infrastructural projects financed by the Fifth Italian Financial Protocol and EU Cohesion Policy 2004-2006. Over the last five years, the share of gross value added of the construction industry expressed as a percentage of total value added was 4.5 per cent. Output by the construction industry followed an upward trend from Lm108.6 million in 2000 to Lm144.0 million in 2005. Output by this industry registered an average annual growth rate of 5.8 per cent over the 2000-2005 period. The upward trend in output by the construction industry was reflected in positive growth rates in gross value added during the 2000-2005 period registering an annual average growth rate of 5.7 per cent. 2.2.4 Competitiveness Maintaining and improving competitiveness is a central goal in Government’s economic and industrial policy. National competitiveness is a function of multiple factors, varying from factors such as macroeconomic stability to the skills and flexibility of employees, from the regulatory regime to the way that companies operate. 12 An indicator of a country’s international price competitiveness is provided by the real effective exchange rate (REER) which captures movements in the domestic currency against movements in competitor countries corrected for inflation differentials. Over the recent years, the Maltese economy registered a decline in international competitiveness. Malta’s real effective exchange rate (REER) increased at a lower rate than that for the EU25 between 2002 and 2004. Meanwhile, the REER for 2005 declined though at a lower rate than that for the EU25. This suggests that competitiveness is still of concern although improvements were recorded. The divergence between the REER and its nominal counterpart reflects domestic inflation relative to that registered in Malta’s competitor countries. Inflation in Malta, based on the Harmonised Index of Consumer Prices (HICP), ranged from a high of 3.0 per cent in 2000 to a low of 1.9 per cent in 2003. Malta’s inflation rate was above the EU25 average during the 2000-2005 period, except in 2001 and 2003 when it was equal to the EU average. In 2005, Malta’s inflation rate based on the HICP stood at 2.5 per cent in 2005, compared to 2.2 per cent for the EU25. 12 Given this complexity, there is not a unique way of measuring competitiveness in its broadest sense.
MALTA – National Strategic Reference Framework 2007-2013 Draft Document for Consultation Unit labour cost growth compares remuneration (compensation per employee) and productivity (Gross Domestic Product per employment) and serves to show how the remuneration of employees is related to the productivity of their labour. 13 Unit labour costs increased substantially in 2001 and 2003 in the wake of higher growth in compensation per employee and contraction in productivity. During 2002, an easing in wage pressures together with an improvement in productivity contributed to a relatively deceleration in unit labour costs. Marginal increases were registered in unit labour costs in 2004 reflecting lower productivity levels. Forecasts for unit labour cost growth in 2005 show that Malta is expected to register a negative unit labour cost growth of –1.8 per cent - hence productivity is anticipated to outweigh the growth in remuneration of employees, thereby increasing Malta’s competitiveness. Table 2.7 change change 2000 2001 2002 2003 2004 2005 2004/2005 2000/2005 EU25 100.0 100.0 100.0 100.0 100.0 100.0 0.0 0.0 Austria 111.1 108.3 105.8 106.6 110.8 111.2 0.4 0.1 Belgium 125.9 126.4 127.6 128.6 128.8 128.7 -0.1 2.2 Cyprus 73.2 73.2 72.0 70.5 73.7 74.7 1.4 2.0 Czech Republic 58.5 59.6 60.0 62.1 64.4 69.0 7.1 17.9 Denmark 105.0 104.6 102.2 103.1 104.1 106.0 1.8 1.0 Estonia 42.4 43.5 45.7 48.0 51.0 54.0 5.9 27.4 Finland 109.4 108.9 107.7 106.8 107.9 107.5 -0.4 -1.7 France 122.2 122.5 120.5 120.3 118.9 119.5 0.5 -2.2 Germany 101.2 100.2 99.8 100.5 100.3 100.6 0.3 -0.6 Greece 89.2 91.7 97.2 100.5 98.2 99.4 1.2 11.4 Hungary 60.6 64.2 66.7 66.9 68.2 70.4 3.2 16.2 Ireland 121.6 123.8 127.7 128.3 129.4 129.0 -1.1 -9.8 Italy 121.2 118.7 115.2 111.9 110.5 109.3 7.7 20.1 Latvia 38.3 39.4 40.2 41.4 42.7 46.0 7.7 20.1 Lithuania 41.0 44.8 44.8 47.1 49.6 51.8 4.4 26.3 Luxembourg 153.4 143.8 141.0 145.5 148.3 148.7 0.3 -3.1 Malta 89.5 84.9 86.4 85.6 81.1 81.9 1.0 -8.5 Netherlands 101.0 107.1 105.9 106.4 108.0 108.4 0.4 7.3 Poland 51.3 50.3 51.6 59.6 62.1 63.0 1.4 22.8 Portugal 72.0 71.4 71.1 65.8 65.7 65.3 -0.6 -9.3 Slovakia 54.1 55.3 58.3 58.4 59.1 61.0 3.2 12.8 Slovenia 69.8 71.3 71.0 72.5 75.2 77.2 2.7 10.6 Spain 97.6 97.4 98.7 100.0 99.3 97.2 -2.1 -0.4 Sweden 106.6 102.7 101.5 104.1 106.5 107.8 1.2 1.1 United Kingdom 103.4 105.0 107.4 106.8 106.3 106.6 0.3 3.1 Source: Eurostat Labour Productivity per Person Employed (EU25=100) Apart from price competitiveness, Malta’s national competitiveness is dependent on labour productivity. Labour productivity as measured by real output per employee increased by 1.6 per cent in the first nine months of 2005 when compared to the 13 A negative growth rate of the unit labour cost index indicates that the output value created is higher than the cost of labour.
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National Strategic Reference Framework

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