Malta’s Next Leap: Productivity, Not Population

Ivan Refalo & Kevin J Borg 

Malta’s economic performance in recent years has been commendable. Rapid growth, rising employment and robust domestic demand have created jobs, increased incomes and strengthened public finances. Yet the model that brought Malta this far may not be the one that carries it successfully into the future.  In fact, it is showing clear signs to the contrary by way of falling per capita productivity and deteriorating quality of life for workers and citizens manifested in the form of overcrowding; pressure on infrastructure, housing, transport, public services, and environmental quality.

Budget 2027 offers an opportunity to set a new direction, one in which economic progress depends less on a growing population and workforce, and more on productivity, innovation and competitiveness.

The strains associated with the current model are increasingly visible. Businesses struggle to find workers, while traffic congestion, pressure on infrastructure, rising housing costs and environmental concerns are affecting people’s daily lives. Bringing in more workers may boost economic activity, but it cannot indefinitely make up for low productivity or the inefficient use of resources.  In fact, the larger the population the more people are needed to service the economy creating a vicious circle.

The challenge is therefore, to create more value from the people, investment and infrastructure Malta already has. This is not an argument against growth, nor does it overlook the important contribution of foreign workers. It is simply a recognition that the country’s next phase of development must be different to what we have grown used to.

Businesses have an important role to play. Greater investment in technology, artificial intelligence, automation and digital tools can help companies become more efficient. But investment in technology must go hand in hand with better management, smarter working practices and a workforce equipped to take on more specialised and better-paid roles.

Technology on its own will not transform the economy.  Business Process Re-Engineering is needed to complement the adoption of technology to ensure that this really results in productivity gains as opposed to just adding an extra layer to already complex processes.   Education and training must also keep pace with the changing needs of employers and workers need practical support as their roles evolve using new, innovative tools and processes.  At the same time, businesses need the confidence and financial capacity to make investments whose benefits may take several years to emerge.

We believe that most stakeholders will agree that economic transformation cannot happen overnight. However, Budget 2027 can help create the right conditions. It should encourage business investment, support skills development and strengthen the infrastructure needed by a modern, productive economy. Reliable energy, efficient transport, responsive public services and effective digital systems are primary concerns which are fundamental to Malta’s future competitiveness.

The same focus on outcomes should apply to public spending. The concern here should go beyond the quantum of the spends to focus on what such expenditure actually delivers. Public money should lead to visible improvements in services, infrastructure and economic capacity. Social support should remain focused on those who need it most whilst deterring wastage and abuse.

On the other face of the fiscal morality coin, stronger action against tax abuse and money laundering is also essential. That Government is owed more than a billion euro in unpaid taxes is of grave concern to hard-working employers and employees. It protects public revenue and ensures that legitimate businesses are not placed at a disadvantage by those that fail to play by the rules.

Economic competitiveness and quality of life cannot be treated as separate goals. A more productive economy should allow businesses to pay better wages, invest for the long term and compete internationally. It should also reduce the need to rely so heavily on continuous population growth, easing some of the pressure on housing, roads, public services and the environment.

Malta’s Economic Vision 2050 was intended to give a good snapshot of where we want to get to eventually, but a long-term strategy matters only if it shapes decisions made today. Each annual budget should move the country closer to its stated goals. Policy should reward businesses that invest, innovate and create higher-value activity, rather than viewing a larger economy as an achievement in itself.

This transition will not happen through a single budget. It will require consistency, effective implementation and an honest assessment of whether policies are delivering results. It will also depend on cooperation between the government, employers, workers and educational institutions.

Budget 2027 can make the change in direction clear. Malta does not have to choose between economic growth and social progress. It needs a form of growth that supports both.

Success should no longer be measured mainly by how quickly the economy expands. It should also be judged by the value Malta creates, the opportunities available to its people and the quality of life the country can sustain.

It is in this spirit that the Association is presenting its pre-Budget proposals.  With Malta’s long-term national interest at their core, the proposals are designed to advance the direction set by Vision 2050 and to ensure that today’s choices build the foundations of a more productive, competitive and resilient economy.  The task now is to look beyond growth expressed largely through headline figures and pursue progress that generates greater value, enhances quality of life and uses the country’s limited resources more wisely.

ENDS

22 October 2026