Economy of Malta
Encyclopedia
The strengths of the Economy
of Malta
are its limestone
, a favourable geographic location, and a productive labour force. Malta produces only about 20% of its food needs, has limited freshwater supplies, and has no domestic energy sources. The economy is dependent on foreign trade, manufacturing (especially electronics), tourism
and financial services
. In 2003, over 1.2 million tourists visited the island. Per capita GDP of $23,200 places Malta just above the middle of the list of European Union
(EU) countries in terms of affluence. The island joined the EU in 2004 despite having been divided politically over the question earlier. A sizeable budget deficit was a key concern, but recent initiatives by government have changed the situation dramatically enough for the country to be admitted into the eurozone
as of 1 January 2008.
, tobacco
, and shipyards industry. The dockyard was later used by the British for military purposes. At times of war, Malta's economy prospered due to its strategic location.
During the Napoleonic Wars
(1800–1815), Malta's economy prospered and became the focal point of a major trading system. In 1808, two-thirds of the cargo consigned from Malta went to Levant
and Egypt
. Later, one-half of the cargo was usually destined for Trieste
. Cargo consisted of largely British and colonial-manufactured goods. Malta's economy became prosperous from this trade and many artisans, such as weavers, found new jobs in the port industry.
In 1820, during the Battle of Navarino
, which took place in Greece
, the British fleet was based in Malta. In 1839, the Peninsular and Oriental Steam Navigation Company
and East India Companies
used Malta as a calling port on their Egypt and Levant runs.
In 1869, the opening of the Suez Canal
benefited Malta's economy greatly as there was a massive increase in the shipping which entered in the port. The economy had entered a special phase. The Mediterranean Sea
became the "world highway of trade" and a number of ships called at Malta for coal and various supplies on their way to the Indian Ocean
and the Far East
.
From 1871 to 1881, about 8,000 workers found jobs in the Malta docks and a number of banks opened in Malta. By 1882, Malta reached the height of its prosperity.
However, the boom did not last long. By the end of the 19th century, the economy began declining and by the 1940s, Malta's economy was in serious crisis. This was primarily due to the invention of large ships which had become oil-fired and therefore had no need to stop in the Grand Harbour of Malta to refuel. The British Government had to extend the dockyard.
At the end of World War II
, Malta's strategic importance had reached a low point. Modern air warfare technology and the invention of the atomic bomb had changed the importance of the military base. The British lost control of the Suez Canal
and withdrew from the naval dockyard, transforming it for commercial shipbuilding and ship repair purposes.
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). Following the September 11 attacks, the tourist industry suffered a temporary setback.
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 favorable 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 noninterest charges by banks. Despite these pressures, consumer price inflation
has remained low (2.2% according to the Central Bank of Malta 2nd Quarterly Report in 2007), reflecting the impact of a fixed exchange rate policy (100% hard peg to the euro, in preparation for currency changeover) and lingering price controls
.
The Maltese Government has pursued a policy of gradual economic liberalization 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 longstanding 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 in Malta is another growing industry (approx. 35 million euros between 1997 and 2011), 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
'World War Z
,, amongst others, were shot in Malta over the last few years), commercials and television series.
Over the period 2001-2004 the mean GDP real growth was 0.4% due to Malta losing pace in tourism and other industries. Unemployment was down to 4.4%, its lowest level in 3 years. Many formerly state-owned companies are being privatized - and the market liberalized.
Fiscal policy has been for some years directed toward bringing down the budget deficit after public debt grew from a negative figure in 1988 to 56% in 1999 and 69.1% in 2009. By 2007, the deficit-to-GDP ratio was comfortably below 3% as required for eurozone
membership, but due to pre-election spending has gone up to 4.4% in 2008 and 3.8% in 2009.
suggested building nuclear power plants on Malta for Italian power supply, this was not accepted by the Maltese.
1,620 GWh (1998)
Electricity - production by source:
fossil fuel:
100%
hydro:
0%
nuclear:
0%
other:
0% (1998)
Electricity - consumption:
1,507 GWh (1998)
Electricity - exports:
0 kWh (1998)
Electricity - imports:
0 kWh (1998)
Agriculture - products:
potatoes, cauliflower, grapes, wheat, barley, tomatoes, citrus, cut flowers, green peppers; pork, milk, poultry, eggs
Currency:
1 euro = 100 cent since 1 January 2008
previously 1 Maltese lira = 100 cents;
Exchange rates:
Maltese liri (LM) per US$1 – 0.4086 (January 2000), 0.3994 (1999), 0.3885 (1998), 0.3857 (1997), 0.3604 (1996), 0.3529 (1995)
Irrevocably fixed conversion rate to the euro: Maltese liri (LM) per EUR1 - 0.4293 (2007)
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
of Malta
Malta
Malta , officially known as the Republic of Malta , is a Southern European country consisting of an archipelago situated in the centre of the Mediterranean, south of Sicily, east of Tunisia and north of Libya, with Gibraltar to the west and Alexandria to the east.Malta covers just over in...
are its limestone
Limestone
Limestone is a sedimentary rock composed largely of the minerals calcite and aragonite, which are different crystal forms of calcium carbonate . Many limestones are composed from skeletal fragments of marine organisms such as coral or foraminifera....
, a favourable geographic location, and a productive labour force. Malta produces only about 20% of its food needs, has limited freshwater supplies, and has no domestic energy sources. The economy is dependent on foreign trade, manufacturing (especially electronics), tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
and financial services
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...
. In 2003, over 1.2 million tourists visited the island. Per capita GDP of $23,200 places Malta just above the middle of the list of European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
(EU) countries in terms of affluence. The island joined the EU in 2004 despite having been divided politically over the question earlier. A sizeable budget deficit was a key concern, but recent initiatives by government have changed the situation dramatically enough for the country to be admitted into the eurozone
Eurozone
The eurozone , officially called the euro area, is an economic and monetary union of seventeen European Union member states that have adopted the euro as their common currency and sole legal tender...
as of 1 January 2008.
Economic history
Prior to 1800 the majority of Maltese were engaged in agriculture or fishing, although there was significant trade. Until then, Malta had very few industries except the cottonCotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
, tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
, and shipyards industry. The dockyard was later used by the British for military purposes. At times of war, Malta's economy prospered due to its strategic location.
During the Napoleonic Wars
Napoleonic Wars
The Napoleonic Wars were a series of wars declared against Napoleon's French Empire by opposing coalitions that ran from 1803 to 1815. As a continuation of the wars sparked by the French Revolution of 1789, they revolutionised European armies and played out on an unprecedented scale, mainly due to...
(1800–1815), Malta's economy prospered and became the focal point of a major trading system. In 1808, two-thirds of the cargo consigned from Malta went to Levant
Levant
The Levant or ) is the geographic region and culture zone of the "eastern Mediterranean littoral between Anatolia and Egypt" . The Levant includes most of modern Lebanon, Syria, Jordan, Israel, the Palestinian territories, and sometimes parts of Turkey and Iraq, and corresponds roughly to the...
and Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...
. Later, one-half of the cargo was usually destined for Trieste
Trieste
Trieste is a city and seaport in northeastern Italy. It is situated towards the end of a narrow strip of land lying between the Adriatic Sea and Italy's border with Slovenia, which lies almost immediately south and east of the city...
. Cargo consisted of largely British and colonial-manufactured goods. Malta's economy became prosperous from this trade and many artisans, such as weavers, found new jobs in the port industry.
In 1820, during the Battle of Navarino
Battle of Navarino
The naval Battle of Navarino was fought on 20 October 1827, during the Greek War of Independence in Navarino Bay , on the west coast of the Peloponnese peninsula, in the Ionian Sea. A combined Ottoman and Egyptian armada was destroyed by a combined British, French and Russian naval force...
, which took place in Greece
Greece
Greece , officially the Hellenic Republic , and historically Hellas or the Republic of Greece in English, is a country in southeastern Europe....
, the British fleet was based in Malta. In 1839, the Peninsular and Oriental Steam Navigation Company
Peninsular and Oriental Steam Navigation Company
The Peninsular and Oriental Steam Navigation Company, which is usually known as P&O, is a British shipping and logistics company which dated from the early 19th century. Following its sale in March 2006 to Dubai Ports World for £3.9 billion, it became a subsidiary of DP World; however, the P&O...
and East India Companies
British East India Company
The East India Company was an early English joint-stock company that was formed initially for pursuing trade with the East Indies, but that ended up trading mainly with the Indian subcontinent and China...
used Malta as a calling port on their Egypt and Levant runs.
In 1869, the opening of the Suez Canal
Suez Canal
The Suez Canal , also known by the nickname "The Highway to India", is an artificial sea-level waterway in Egypt, connecting the Mediterranean Sea and the Red Sea. Opened in November 1869 after 10 years of construction work, it allows water transportation between Europe and Asia without navigation...
benefited Malta's economy greatly as there was a massive increase in the shipping which entered in the port. The economy had entered a special phase. The Mediterranean Sea
Mediterranean Sea
The Mediterranean Sea is a sea connected to the Atlantic Ocean surrounded by the Mediterranean region and almost completely enclosed by land: on the north by Anatolia and Europe, on the south by North Africa, and on the east by the Levant...
became the "world highway of trade" and a number of ships called at Malta for coal and various supplies on their way to the Indian Ocean
Indian Ocean
The Indian Ocean is the third largest of the world's oceanic divisions, covering approximately 20% of the water on the Earth's surface. It is bounded on the north by the Indian Subcontinent and Arabian Peninsula ; on the west by eastern Africa; on the east by Indochina, the Sunda Islands, and...
and the Far East
Far East
The Far East is an English term mostly describing East Asia and Southeast Asia, with South Asia sometimes also included for economic and cultural reasons.The term came into use in European geopolitical discourse in the 19th century,...
.
From 1871 to 1881, about 8,000 workers found jobs in the Malta docks and a number of banks opened in Malta. By 1882, Malta reached the height of its prosperity.
However, the boom did not last long. By the end of the 19th century, the economy began declining and by the 1940s, Malta's economy was in serious crisis. This was primarily due to the invention of large ships which had become oil-fired and therefore had no need to stop in the Grand Harbour of Malta to refuel. The British Government had to extend the dockyard.
At the end of World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, Malta's strategic importance had reached a low point. Modern air warfare technology and the invention of the atomic bomb had changed the importance of the military base. The British lost control of the Suez Canal
Suez Canal
The Suez Canal , also known by the nickname "The Highway to India", is an artificial sea-level waterway in Egypt, connecting the Mediterranean Sea and the Red Sea. Opened in November 1869 after 10 years of construction work, it allows water transportation between Europe and Asia without navigation...
and withdrew from the naval dockyard, transforming it for commercial shipbuilding and ship repair purposes.
Modern economy
Major resources are limestone, a favorable geographic location, and a productive labor force. Malta produces only about 20% of its food needs, has limited fresh water supplies, and has few domestic energy sources. The economy is dependent on foreign trade, manufacturing (especially electronics and pharmaceuticals), and 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). Following the September 11 attacks, the tourist industry suffered a temporary setback.
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 favorable performance.
Buoyed by continued rapid growth, the economy has maintained a relatively low rate of unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
. 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
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
has led—in the context of interest rate controls - to credit rationing to the private sector and the introduction of noninterest charges by banks. Despite these pressures, consumer price inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
has remained low (2.2% according to the Central Bank of Malta 2nd Quarterly Report in 2007), reflecting the impact of a fixed exchange rate policy (100% hard peg to the euro, in preparation for currency changeover) and lingering price controls
Price controls
Price controls are governmental impositions on the prices charged for goods and services in a market, usually intended to maintain the affordability of staple foods and goods, and to prevent price gouging during shortages, or, alternatively, to insure an income for providers of certain goods...
.
The Maltese Government has pursued a policy of gradual economic liberalization 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 longstanding structural weaknesses.
There is a strong manufacturing base for high value-added products like electronics
Consumer electronics
Consumer electronics are electronic equipment intended for everyday use, most often in entertainment, communications and office productivity. Radio broadcasting in the early 20th century brought the first major consumer product, the broadcast receiver...
and pharmaceuticals, and the manufacturing sector has more than 250 foreign-owned, export-oriented enterprises. Tourism generates 35% of GDP. Film production in Malta is another growing industry (approx. 35 million euros between 1997 and 2011), despite stiff competition from other film locations in Eastern Europe
Eastern Europe
Eastern Europe is the eastern part of Europe. The term has widely disparate geopolitical, geographical, cultural and socioeconomic readings, which makes it highly context-dependent and even volatile, and there are "almost as many definitions of Eastern Europe as there are scholars of the region"...
and North Africa
North Africa
North Africa or Northern Africa is the northernmost region of the African continent, linked by the Sahara to Sub-Saharan Africa. Geopolitically, the United Nations definition of Northern Africa includes eight countries or territories; Algeria, Egypt, Libya, Morocco, South Sudan, Sudan, Tunisia, and...
, with the Malta Film Commission providing support services to foreign film companies for the production of feature cinema (Gladiator
Gladiator (2000 film)
Gladiator is a 2000 historical epic film directed by Ridley Scott, starring Russell Crowe, Joaquin Phoenix, Connie Nielsen, Ralf Möller, Oliver Reed, Djimon Hounsou, Derek Jacobi, John Shrapnel and Richard Harris. Crowe portrays the loyal Roman General Maximus Decimus Meridius, who is betrayed...
, Troy
Troy (film)
Troy is a 2004 epic war film written by David Benioff and directed by Wolfgang Petersen based on the events of the Trojan War. Its cast includes Brad Pitt as Achilles, Eric Bana as Hector.It was nominated for the Academy Award for Costume Design.-Plot:...
, Munich
Munich (film)
Munich is a 2005 historical fiction film about the Israeli government's secret retaliation attacks after the massacre of Israeli athletes by the Black September terrorist group during the 1972 Summer Olympics. The film stars Eric Bana and was produced and directed by Steven Spielberg...
and Count of Monte Cristo
The Count of Monte Cristo (2002 film)
The Count of Monte Cristo is a 2002 adventure film directed by Kevin Reynolds. The film is the tenth adaptation of the book of the same name by Alexandre Dumas, père and stars Richard Harris, James Caviezel, Dagmara Dominczyk, Guy Pearce, and Luis Guzman...
'World War Z
World War Z (film)
World War Z is an upcoming post-apocalyptic horror film based on the novel of the same name by Max Brooks. The film is directed by Marc Forster and stars Brad Pitt, with a script written by J. Michael Straczynski and Matthew Michael Carnahan. The film is scheduled to be released on December 21,...
,, amongst others, were shot in Malta over the last few years), commercials and television series.
Over the period 2001-2004 the mean GDP real growth was 0.4% due to Malta losing pace in tourism and other industries. Unemployment was down to 4.4%, its lowest level in 3 years. Many formerly state-owned companies are being privatized - and the market liberalized.
Fiscal policy has been for some years directed toward bringing down the budget deficit after public debt grew from a negative figure in 1988 to 56% in 1999 and 69.1% in 2009. By 2007, the deficit-to-GDP ratio was comfortably below 3% as required for eurozone
Eurozone
The eurozone , officially called the euro area, is an economic and monetary union of seventeen European Union member states that have adopted the euro as their common currency and sole legal tender...
membership, but due to pre-election spending has gone up to 4.4% in 2008 and 3.8% in 2009.
Energy
Even though it has great potential for solar and wind power, Malta produces almost all its electricity using oil, importing 100% of it. Recently, Silvio BerlusconiSilvio Berlusconi
Silvio Berlusconi , also known as Il Cavaliere – from knighthood to the Order of Merit for Labour which he received in 1977 – is an Italian politician and businessman who served three terms as Prime Minister of Italy, from 1994 to 1995, 2001 to 2006, and 2008 to 2011. Berlusconi is also the...
suggested building nuclear power plants on Malta for Italian power supply, this was not accepted by the Maltese.
Industry
| Sector | Average annual employment |
Average annual earnings per capita in euro |
|---|---|---|
| Food and Beverages; Tobacco | 2,873 | 13,441 |
| Textiles and textile products | 422 | 15,512 |
| Wearing apparel and clothes | 733 | 11,698 |
| Leather and leather products | 185 | 9,308 |
| Wood and wood products | 78 | 12,000 |
| Paper and paper products | 265 | 15,698 |
| Publishing and printing | 1,669 | 17,615 |
| Chemicals and chemical products | 1,038 | 19,052 |
| Rubber and plastic products | 1,578 | 15,254 |
| Other nonmetallic mineral products | 766 | 11,928 |
| Fabricated metal products | 596 | 14,451 |
| Machinery and equipment n.e.c. | 446 | 13,518 |
| Electrical machinery and apparatus | 1,409 | 16,515 |
| Radio, TV and Communication equipment | 3,168 | 18,673 |
| Medical, precision and optical instruments | 877 | 15,582 |
| Motor vehicles, trailers and semitrailers | 50 | 10,220 |
| Other transport equipment | 258 | 20,938 |
| Furniture and Manufacturing n.e.c. | 1,597 | 15,753 |
| Total | 18,008 | 15,812 |
Facts and figures
Electricity - production:1,620 GWh (1998)
Electricity - production by source:
fossil fuel:
100%
hydro:
0%
nuclear:
0%
other:
0% (1998)
Electricity - consumption:
1,507 GWh (1998)
Electricity - exports:
0 kWh (1998)
Electricity - imports:
0 kWh (1998)
Agriculture - products:
potatoes, cauliflower, grapes, wheat, barley, tomatoes, citrus, cut flowers, green peppers; pork, milk, poultry, eggs
Currency:
1 euro = 100 cent since 1 January 2008
previously 1 Maltese lira = 100 cents;
Exchange rates:
Maltese liri (LM) per US$1 – 0.4086 (January 2000), 0.3994 (1999), 0.3885 (1998), 0.3857 (1997), 0.3604 (1996), 0.3529 (1995)
Irrevocably fixed conversion rate to the euro: Maltese liri (LM) per EUR1 - 0.4293 (2007)