Malta Business Review ECONOMY 2017 REVIEW ECONOMY ECONOMY 2017 €88m The government reported a surplus in its finances which is expected to amount to around €88m (equivalent to 0.8% of GDP). For 2018, the surplus is expected to be 0.5% of GDP €10.8bn GDP for 2017 is expected to be €10.8bn. Furthermore, next year, GDP is expected to increase by 7.6% in nominal terms (5.6% in real terms) 4.1% In August 2017, the number of people registering for work amounted to less than 2,500. The rate of unemployment is estimated at 4.1% of the labour supply 1.9m Inbound tourists in 2016 amounted to over 1.9m visitors representing an increase of 10.2% over the previous year 1.1% The 12-month moving average rate of inflation in August 2017 stood at 1.1% which is the same as that registered in August 2016. For 2018, the rate of inflation is expected to be 1.5% €1.75 The weekly cost of living increase for 2018 is €1.75 per week. Pensioners will receive an increase of €2 per week €3.7bn Estimated tax revenue for 2017 is expected to be €3.7bn and is expected to rise to €4.4bn by 2020 €5.9bn Government debt as at the end of 2017 is expected to amount to 54.9% of GDP (i.e €5.9bn) and is expected to decrease to 44.6% of GDP by 2020 €2.1bn The visible trade gap reached €2.1bn for the period January to July 2017 due to exports decreasing at a higher rate than the decrease in imports over the same 1,414 The total number of Collective Investment Schemes between January and August 2017 increased by 83 bringing the total licensed number of Collective Investment Schemes to 1,414 1. Business confidence As far as the economy is concerned, 2018 promises to be a good year that is expected to continue in the current growth streak. Basing one’s projections on EY Malta’s Malta Attractiveness Survey, Malta is bound to remain an attractive country for investment, although this attractiveness in certain aspects is diminishing. The economy is also expected to grow, as more businesses are seeking to capitalise on numerous opportunities in a variety of sectors. In a recent Chamberconducted survey assessing headline business indicators for 2018, businesses said that sales, exports, employment and investment appear to be on an upward trajectory as businesses are optimistic about their future. Another recently conducted survey by the Malta Chamber of Commerce, Enterprise & Indusstry carried out among its members concluded that businesses were ready to create around 3,000 jobs in the next three years. This positive sentiment augurs well for business in Malta, yet 2018 will certainly hold its own challenges which will require serious and thorough solutions. 2. Malta’s HR challenge and its ability to retain staff Malta has one of the lowest unemployment rates in Europe, but it’s facing an employment crisis of a different sort – finding enough people to fulfil the roles that need to be filled. In 2016, Malta registered a net increase of 10,500 jobs over the previous year, a trend that shows no signs of abating, and employers are growing increasingly desperate to find people to fill crucial positions, leading to fierce competition, poaching of valued employees and price gouging, especially from foreign firms. Clyde Caruana, Chairman of Malta’s state employment agency JobsPlus, has stated that despite the fact that more than 20,000 foreign workers have come to the island over the past few years, even more are needed simply to keep the economy running. There is also the question of whether 22 Malta is attractive enough for foreign workers to settle down permanently. 3. Malta’s transparency and good corporate governance issues The economy has reached new heights and the strong economic output can be felt across industries as well as within society at large. It’s an indisputable fact however, that no matter how well the economy has been doing, issues of transparency, whether real or perceived, require urgent addressing. Though the appetite for investment appears to remain healthy as our businesses continue to register optimistic traits, the country must also consider the sustainability of Malta's reputation as a legitimate business hub in the long term. In the present economic climate, the country must endeavour to dissipate any uncertainty. In order for these expectations to truly materialise, it is critical for the country to realise that good corporate governance is not an option. 4. Malta’s ability to keep up with regulatory changes Malta’s nimbleness and agility when it came to emerging sectors such as iGaming and financial services, transformed the economy in the early to mid-2000s, from one that was far too heavily reliant on tourism to the one we have today, where sophisticated tertiary services form the backbone of the economy. However, Malta’s ability to keep up with global regulatory changes seems to be losing some of its momentum in nearly all fields except for iGaming. While iGaming is crucial to Malta’s economy, generating more than 12 per cent of its annual economy, other sectors that require just as much focus cannot be neglected. 5. Malta’s tourism product Malta is currently breaking record after record when it comes to tourism figures, and there’s no doubt that the marketing and promotional aspect is being handled with great skill, but unless stricter safeguards are placed upon Malta’s touristic offering, our sustainability might be at stake on a long-term basis. The proliferation of generic, unsightly buildings and the general overurbanisation of the country risk destroying Malta’s unique heritage, while the littered and overcrowded beaches will stop being so appealing unless swift action is taken. Furthermore, the HR problem that currently exists across all industries is particularly pronounced when it comes to sectors directly related to tourism, such as hotel and catering work – it’s harder than ever to find people who want to do an excellent job in such a tough industry. 6. Whether Malta will manage to update its ageing and outdated infrastructure Malta’s population has risen by about 25,000 in the space of 10 years, boosted by expats who now live and work on the island. It’s evident that the current capacity of the present road network is just not enough to handle the huge flows of traffic, particularly to central areas of the island where hubs of industry and commerce are located. According to EY Malta’s Malta Attractiveness Survey, more than a third of respondents (36 per cent) believe that the current transport and logistics infrastructure is not attractive from an FDI standpoint, and 63 per cent supported investment in major infrastructure and urban projects. And with 43 new vehicles being added to Malta’s roads every single day, the situation is bound to get worse. The 2018 Budget focused heavily on ways to fix Malta’s infrastructure, with the €700 million, seven-year road project, which was a central tenet of the Labour Party’s electoral manifesto, scheduled to begin in 2019. However, while it was acknowledged that the traffic problem will not be solved just through investment in better roads, and that the congestion problem could be attributed to a cultural dependence on private cars, there was no mention of the introduction of a rapid mass transport system. <strong>MBR</strong> Credit: Price WaterhouseCoopers; Ernst & Young;Chamber of Commerce, Enterprise &industry (stats)
INVESTING IN SKILLS An allocation of €8 million has been made available for a new initiative to promote training activities held till 30 th June 2020. Such activities will be financed (80% of eligible costs) from the European Social Fund under the Operational Programme II (2014 - 2020). For more details or further information kindly contact the INVESTING in SKILLS Unit, EU Funded Schemes Division, Jobsplus, Hal Far BBG 3000 Tel: 2220 1300 • Email: iis.jobsplus@gov.mt • URL: www.jobsplus.gov.mt Aid Scheme part-financed by the European Union Operational Programme II – Cohesion Policy 2014 - 2020 Investing in human capital to create more opportunities and promote the well-being of society Operational Programme II - European Structural and Investment Funds 2014-2020 “Investing in human capital to create more opportunities and promote the well-being of society” Aid Scheme part-financed by the European Social Fund Co-financing rate: 80% European Union; 20% National Funds
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