'Malta's population-focused growth has reached its limit': business expert

Malta’s economic growth model, which has so far been fuelled by population growth, is reaching its “natural limits”, the lead author of a publicly funded productivity report told a conference on Friday.

“While our economy has grown impressively, registering over four per cent per annum growth over the decade, this growth has been largely fuelled by increases in labour input and population, and not by productivity gains. This growth model is reaching its natural limits,” JP Fabri said.

“If we want to secure sustainable prosperity, we must shift from a growth model driven by volume to one driven by value.”

Fabri, a business consultant, was appointed to compile the report by the National Productivity Board, an entity within the Malta Council for Economic and Social Development.

He said Malta’s economic story is one of success in the face of global pressures, but Malta’s productivity rate still lags behind.

“According to the latest data – Malta's GDP per hour worked – an internationally recognised and accepted measure for productivity, remains below the European average,” he said.

Fabri lanched Malta's annual national productivity report for 2024 during the conference.

According to the report, there has been an increasing reliance on non-EU workers, and while growth has come from service exports such as tourism, "the steady influx of foreign labour has also strengthened demand across various sectors". 

Malta's "reliance on foreign workers has spotlighted domestic skill shortages in key sectors, particularly finance and technology, creating barriers to productivity improvements", the report notes.

Policies to bridge skill gaps have not yet been sufficient to keep up with the economic momentum. This has resulted in the influx of foreign workers, it adds. 

The report proposes several measures to change that, while transitioning the economy to prioritise digital and environmental change, also known as a “twin transition”.

Upgrading the energy grid, improving public transport, and providing more alternative commuting options would improve Malta’s productivity, the report suggests.

“Transport systems, therefore, require a fundamental shift toward multi-modal solutions that integrate public transit, cycling, and pedestrian infrastructure with energy-efficient vehicles. Implementing a smart traffic management system can further optimise urban mobility, reducing congestion and emissions,” the report says.

Better training and education opportunities would foster a better-skilled workforce, which “is essential for driving and sustaining the twin transition”

Small and medium-sized businesses should also have better access to financing, especially if related to digital and environmental initiatives.

At the same time, the Business First hub of Malta Enterprise should provide “tailored resources, advisory services, and case studies with a focus on the twin transition” for SMEs.

Better coordination among government entities, mandatory energy-efficient building standards for all new developments, creating a national twin transition strategy, and more decarbonisation efforts are also recommended.

“Fragmentation and overlapping responsibilities remain significant barriers to progress, particularly in aligning green and digital priorities. Instead of creating new administrative structures, Malta should enhance the capacity and coordination of existing mechanisms,” the report suggests.

Social dialogue junior minister Andy Ellul and MCESD chair David Xuereb attended the presentation alongside many of Malta's social partners.