The recent Eurobarometer survey for Malta provides crucial insights into the prevailing mood, particularly as the upcoming Budget 2024 looms on the horizon.

The economic landscape in Malta, a primary concern for its citizens, has undergone a noticeable transformation. While 56 per cent of respondents still view the economic situation positively, this number has plummeted by 19 percentage points since the prior Eurobarometer conducted in January and February. Moreover, a mere 12 per cent anticipate improvements in the economic climate over the next year, marking a sharp decline of 29 percentage points from earlier in the year.

This economic apprehension extends to the job market, with 22 per cent foreseeing a bleaker employment outlook, in stark contrast to the paltry 12 per cent expecting improvement. These growing concerns are largely attributed to the relentless rise in the cost of living, which shows no signs of relenting.

Immigration also emerges as a top concern for the Maltese populace. Unlike some EU member states, Malta contends with an influx of non-Maltese residents, especially in recent years, bringing immigration to the forefront of national discourse.

Corruption looms large, with a staggering 92 per cent of respondents perceiving it as pervasive. The belief in increased corruption, up by 26 percentage points since 2022, is laid at the feet of political parties, officials involved in permitting and tendering processes, and politicians. This sentiment resonates with the majority of businesses in Malta, where 76 per cent also regard corruption as a significant issue.

Remarkably, these concerns transcend political divides, indicating a collective demand for action. As Malta prepares for the upcoming Budget 2024, the expectations of the business sector hold considerable sway in addressing these pressing challenges. The resounding call for measures to combat the prevailing malaise and address economic and social issues should serve as a compass guiding policymakers toward a more optimistic future.

Budget 2024 wish list

Manfred Galdes, managing partner, ARQ Group

I would like to see initiatives and government incentives for greener and more sustainable finance solutions for both households and businesses for the here and now. These could be introduced in the form of government support, grants or incentives for sustainable buildings, or refurbishments and redevelopment initiatives that truly integrate sustainability into their design.

Such incentives could be combined with more government support for households and individuals to have access to sustainable finance via lenders and public/private funding initiatives, particularly for longer-term funding requirements and for those who lack access to funding.

Sustainable initiatives also need to be seen in conjunction with a realisable strategy for reducing traffic congestion and pollution, by incentivising people and businesses to seek alternative ways of travel, by helping to reduce non-essential car journeys and encouraging ways of commuting and travelling that use eco-friendly methods of transport.

Finally, the budget should always invest in the long-term success of the country. The importance of continuously improving the quality and extensiveness of education should be focussed across the whole spectrum of schooling in Malta, as well as supporting a more holistic approach to education, beyond the standard academic subjects, and enabling the supplementation of education curriculums with real-life skills, across all age brackets.

Anthony Gatt, director, Caritas Malta

The fast economic growth in the last decade has brought environmental harm, overpopulation, increased mental health difficulties and a widening gap between rich and poor. My three main priorities for a new economic model would be:

Investing in holistic well-being by ensuring accessible healthy food options, communal gardening spaces, and quality sports facilities. Promoting eco-friendly transportation modes like walking, cycling, and public transit while discouraging car use is crucial. Offering grants to young families who live near their parents can provide vital support for the elderly, delaying their need for care facilities. Increasing support for NGOs that encourage volunteering fosters improved mental health. These measures not only create a healthier population but also lead to substantial savings in the healthcare system, benefiting society as a whole.

The second priority is securing a decent living for all by ensuring affordable housing for low-income families and addressing rental overcrowding in apartments that is pushing individuals into renting very precarious properties. This can be addressed by setting minimum housing standards.

The third priority is more robust good governance and social equity principles. Prioritizing good governance for accountability and efficiency within government services is crucial to improving productivity and avoiding wastage of vital human and financial resources. Authorities need to promote a work ethic of pride and quality in whatever we do as a nation.

Michael Briguglio, economist

The three priorities which should be addressed in this year’s budget, in relation to societal expectations, are cost of living, migration, and the environment.

It is clear that many people are not coping with increase in prices of goods and services, from foodstuffs to rent. This is also clearly expressed as the major concern of respondents in scientific surveys. The phenomenon of the working poor, who play by the rules but lose the game, is evident in Maltese society today.

Another major concern expressed in surveys is related to population growth. The population of Malta has grown by 20 per cent in a decade – mainly through foreign workers, many of whom are highly exploited and without unions to defend their rights. This is having impacts on the cost of living, the infrastructure, as well as social cohesion. The government should seriously consider whether an economy dependent on this type of growth is sustainable and should invest more in social integration.

Finally, the government does allocate funds to ‘big’ ‘green’ projects, but what many people would like to see is the proper allocation of funds and resources for matters related to everyday life such as accessible pavements, infrastructure that matches the size of the population and waste collection to mention a few.

Abigail Mamo, SME Chamber

To address the global challenges our country is facing, the SME Chamber is suggesting several fiscal measures that will help improve affordability and investment appetite, both of which have been dented by inflation.

The first challenge in that of addressing inflation which is afflicting consumers and businesses. Our proposals include widening tax brackets, increasing the non-taxable income from 10,000 to 14,000, and reducing corporate tax beyond the electoral promise of 25 per cent to create a level playing field for local businesses competing with foreign ones paying just five per cent tax. Lowering VAT on essential goods and removing excise tax can also help combat inflation.

Secondly, the country is grappling with a labour shortage and declining workforce quality which is driving recruitment and retention costs higher than ever. To tackle this, the SME Chamber proposes a secondment plan from the public to the private sector, better coordination for engaging third-country nationals, attractive retention programs, and the revival of modern trade schools.

Lastly, there’s a need for more prudent government spending. Reforming the public procurement system to ensure the cost-effective use of public funds is crucial. Current practices such as direct orders, budget overruns, poor planning, and lack of strategy must be addressed to maximise taxpayers’ money utilisation.

Alan Arrigo, Malta Chamber, Tourism Section

The Malta Chamber’s Tourism Operators sector’s recognition that tourism remains a crucial pillar that will continue to shape the future of our islands is underscored by over 120 proposed action points put forward in the Rediscover document prepared by a wide range of tourism stakeholders. These proposals are reflected in four priorities.

Encouraging Sustainability Certification for Tourism Operators by offering a monetary contribution of 50% towards the costs of sustainability certification for tourism operators thus incentivizing our tourism industry to adopt eco-friendly practices and prioritize the long-term health of our environment.

Addressing how the Tour Operator Margin Scheme (TOMS) Directive is being implemented in Malta given how this has been putting our local Destination Management Companies (DMCs) at a significant disadvantage compared to their European counterparts. Our proposal is a short-term measure to level the playing field until EU-level reviews take place.

The introduction of an HMO License Category for Budget Accommodation. As Malta’s appeal continues to grow as a sought-after destination for further education, a license category for Houses in Multiple Occupation (HMO) could be introduced as a specifically tailored category that enables the provision of budget accommodation for students.

Lastly, encouraging language learning and integration by incentivizing the tourism sector to subsidize language courses offered by accredited language schools to encourage employees in the tourist sector to learn basic Maltese. This will not only be a step towards greater integration but could contribute towards decreasing turnover and fostering a stronger sense of community.

Marthese Portelli, Malta Chamber

Budget 2024 gives us the opportunity to address a number of pressing issues that have been left ineffectively tackled over a number of years and which are eroding Malta’s productivity and competitiveness away.

Firstly, substantial investment is imperative to bolster our infrastructure. This investment should facilitate economic growth, align with our environmental and climate change objectives, and ensure resilience for the foreseeable future. It encompasses our transportation and communication networks, utilities, digital infrastructure, and the streamlining of public services to reduce bureaucracy and enhance efficient enforcement.

Budget 2024 must prioritize long overdue reforms. These include reforming public procurement to ensure fair competition and prevent wasteful expenditure on subpar projects. Additionally, we need to revamp our judicial system, establishing specialized commercial courts to eliminate unacceptable delays. Customs reform is essential to boost operational efficiency and combat illicit imports. Furthermore, planning reform is critical to strike a balanced equilibrium between urban development and preserving our cultural and heritage assets.

Lastly, the Budget must address our human capital challenges. The focus should shift from input-driven growth to productivity. Incentives such as tax benefits and revised retirement options should be offered to entice Maltese workers, including highly skilled expatriates, back into the private sector. Implementing more on-the-job, offsite, and online training programs will upskill our workforce. Simultaneously, we must tackle the looming pension crisis while monitoring the risk of locally induced inflation, stemming from wage increases outpacing productivity growth, which threatens our competitiveness and long-term prosperity.

Joanne Bondin, MEA

Malta is facing complex challenges that require the country to ensure long-term economic resilience which MEA believes could be achieved through a three-pronged strategy that encompasses fiscal responsibility, workforce optimization, and a strengthening of economic foundations.

Malta’s national debt is a matter of concern, and addressing it is a top priority through a rigorous review of government expenditure, by eliminating unnecessary spending and streamlining public services. Transparency plays a pivotal role here and the government needs to commit to disclosing expenditure items if it wants to restore public trust and accountability.

The second priority should be a reduction of Malta’s dependence on a substantial number of foreign employees by optimising human resources and investing more in training and upskilling the local workforce, making them more competitive in various industries to decrease our reliance on imported labour. MEA is also proposing incentives tailored to the skills and preferences of elderly citizens for pensioners to re-enter the labour market.

The third priority is strengthening our economic foundations and proper planning for the future through much-needed tax adjustments shifting construction activities toward strengthening infrastructure to enhance transportation, connectivity, and economic productivity.

Is it really up to the private sector?

Comments by Malta’s Finance Minister Clyde Caruana during a seminar recently organised by the Central Bank of Malta seem to have ruffled some feathers.

Minister Caruana called on the private sector to take the lead in shaping the country’s economic future and encouraged business leaders and entrepreneurs to generate innovative ideas and solutions for Malta’s economy.

While the Minister’s comments described the government’s aim to support and collaborate with the private sector steering Malta towards a new economic direction, his comments seemed to indirectly suggest that the government’s role should be to support and facilitate change rather than being the primary driver of change.

“I appreciate where the minister is coming from, however, we must be sure not to have misplaced expectations because ultimately, the private sector will always try to maximise its returns subject to the rules of the game. And it is policymakers that make those rules,” said Silvan Mifsud from EMCS.

Malta requires a new economic model built on the pillars of innovation, excellence and sustainability

“In the absence of efficient regulation and enforcement, and within the reality of strong government intervention in the economy (eg. recruitment and direct finance), the end result is an element of market distortion and shifts in resource allocation to certain sectors which do not necessarily provide the highest productive output. This makes it difficult, if not impossible for the private sector alone to bring about the needed changes to Malta’s present economic growth model,” said Mifsud.

“The fundamental changes needed to reshape Malta’s economy, which should be based on higher productivity and value-added, can only be achieved by having government, social partners and all relevant stakeholders come together in a true collaborative spirit, within the confines of one national agenda that seeks the common good,” he added.

“Malta requires a new economic model built on the pillars of innovation, excellence and sustainability and although the private sector should be the primary driver of such a model, the government needs to be an enabler by investing in the infrastructure, through law enforcement, through good governance, and through meaningful legislation,” said economist Lawrence Zammit.

“It is useless to speak of a new economic model if we keep causing irreparable damage to the environment if we allow mediocrity to take over, and if there is no mindset to move up the value chain.”

“Our economy should not be supporting or even allowing space for those business activities which are based on low-cost labour imported from third-country nationals but should support those businesses which are investing significantly in innovating their processes and their products and services.”

“I agree with the finance minister’s statement on the need to cut down inefficiencies and support change, but these comments are long overdue. But after having heard time and time again about the government’s new ten-year economic vision ever since its launch back in 2021, it is somewhat ironic that the private sector is now being asked to forge a new economic direction and act as the driving force for change,” added Norman Aquilina, CEO of Farsons Group.

“While it is positive to encourage a stronger sense of initiative from the private sector, which remains the engine of economic growth, a holistic approach is absolutely essential and this calls for a joint effort and certainly not exclusively that of government or private sector.”

“While the private sector needs to invest in business models which are competitive and, as much as possible, future-proof, Government has to lead through more meaningful dialogue to be able to better formulate its economic priorities and policies, with the obligation to establish clear directional guidelines which support policy coherence and ensure the right orientation. Once the economic landscape has been set and remains supported, the private sector will be ready and geared up to plug and play,” added Aquilina.

“Government has seemingly given up in its efforts to bring about economic change. However, I firmly believe that whilst the private sector should be at the forefront of this transformation, it is the Government that needs to lead through policy direction, support initiatives, funding, fighting bureaucracy and making it easier to do business,” commented Jerome Caruana Cilia, Nationalist MP and Shadow Minister for Finance.

“At the same time, I am glad the Minister has finally recognised that Malta’s economic model, championed by Labour for the best part of the past decade, has failed. The Nationalist Party, with many constituted bodies, has long been highlighting how an economic model based on excessive consumption, without value added, based on increasing Malta’s population without any plan at all, cannot go on.”

“While we need to create new economic sectors, we also need to look at existing industries and economic sectors and see how we can build and sustain them better. The Opposition, constituted bodies and the private sector have constantly been sharing proposals, but the government never bothered to listen. Now that it finds itself with its back against the wall, it has thrown the towel and wants someone else to pick up the pieces,” added Caruana Cilia.