The gap between high and low earners is dropping across Europe, but not in Malta, with only four EU countries now sharing their wealth more unequally than Malta.
An analysis of the country’s economic prospects published on Friday by audit firm KPMG suggests Malta’s income inequality has now reached 33%, well above the EU rate of 29.6%.
The only countries in Europe with a bigger gap between high earners and those living from paycheck to paycheck are Bulgaria, Lithuania, Latvia and Portugal.
More damningly, while income inequality has steadily dropped across Europe over the past decade, Malta has been bucking the trend in recent years, with a sharp increase since 2019.
Welfare state holding things together
KPMG says that Malta has its welfare state, which provides additional income to disadvantaged or low-income groups, to thank for the income inequality not being even higher.
Without it, income inequality would jump to a staggering 44%, “which further highlights how important the welfare system is in creating a more equitable society,” the report’s authors say.
Economic growth up across several sectors
This despite Malta keeping up its strong economic growth throughout 2023 and into the start of 2024.
Several economic sectors have continued to grow in early 2024, the report says, with the accommodation and food services industry in particular performing strongly.
Meanwhile, the construction industry appears to be bouncing back, now showing growth after “a prolonged period of contraction”.
The country’s workforce also appears to be in good health, with over 306,500 people now employed, 4.6% higher than last year. KPMG predicts that Malta’s unemployment rate will remain steady at 3.1% until 2026.
Inflation down, expected to keep shrinking
The worst of the inflation crisis appears to be behind us, the report suggests, with price inflation expected to drop to 2.4% this year and to 1.9% by 2026, less than half the 5.6% registered last year.
Although Malta's inflation rate was higher than that of the Eurozone average for most of 2023 and early 2024, this appears to have been reversed in recent months.
Malta's inflation rate reflects the energy subsidies that remain in place and which, the report's authors drily note, "are forecasted not to be winding down fast enough" according to the European Commission.