Malta - Economic Factors

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Major resources in Malta are limestone, a favourable geographic location, and a productive labour force.

The economy is dependent on foreign trade, manufacturing (especially electronics and pharmaceuticals), an ever-growing IT and financial services sector and last but not least tourism. Economic recovery of the European economy has lifted exports, tourism, and overall growth. Malta adopted the Euro on 1 January 2008.

Tourist arrivals and foreign exchange earnings derived from tourism have steadily increased since the 1987 watershed, in which there was growth from the previous year of, respectively, 30% and 63% (increase in terms of U.S. dollars).

With the help of a favourable international economic climate, the availability of domestic resources and industrial policies that support foreign export-oriented investment, the economy has been able to sustain a period of rapid growth. During the 1990s, Malta's economic growth has generally continued this brisk pace. Both domestic demand (mainly consumption) boosted by large increases in government spending, and exports of goods and services contributed to this favourable performance.

Buoyed by continued rapid growth, the economy has maintained a relatively low rate of unemployment. Labour market pressures have increased as skilled labour shortages have become more widespread, despite illegal immigration, and real earnings growth has accelerated.

Growing public and private sector demand for credit has led - in the context of interest rate controls - to credit rationing to the private sector and the introduction of non-interest charges by banks. Despite these pressures, consumer price inflation has remained low, reflecting the impact of a fixed exchange rate policy.

The Maltese Government has pursued a policy of gradual economic liberalisation and privatisation, taking some steps to shift the emphasis in trade and financial policies from reliance on direct government intervention and control to policy regimes that allow a greater role for market mechanisms. While change has been very substantial, by international standards, the economy remains fairly regulated and continues to be hampered by some long-standing structural weaknesses.

There is a strong manufacturing base for high value-added products like electronics and pharmaceuticals, and the manufacturing sector has more than 250 foreign-owned, export-oriented enterprises. Tourism generates 35% of GDP. Film production is another growing industry, despite stiff competition from other film locations in Eastern Europe and North Africa, with the Malta Film Commission providing support services to foreign film companies for the production of feature cinema (Gladiator, Troy, Munich and Count of Monte Cristo, amongst others, were shot in Malta over the last few years), commercials and television series.

Lenient Tax & Fiscal regulations have, over the last three years, attracted a large amount of online gaming companies to set up base here, opening up a whole new sector.