Malta’s economy has experienced hugely impressive growth rates since 2013 driven mainly by increased consumption and investment. Sectors such as construction, tourism, retail, and remote gaming have grown almost exponentially to accommodate increased domestic and international demand.

Inevitably, increasing levels of consumption and investment have caused a seismic shift in the labour market with thousands of jobs now filled by European Unon and third country workers.

Not everything is good news: wages in sectors like construction and social care have struggled to keep up with wage levels in the financial services and remote gaming. Second, many have questioned the sustainability of economic growth at levels that are evidently unprecedented in Malta’s economic history. On the plus side, we would not have registered the budgetary surpluses had the economy not grown as it did.

As we enter the second decade of the new millennium, Malta’s economy continues to grow at levels well above the euro area average, the same euro area that is now entering a phase of economic downturn and facing a higher incidence of risk factors affecting the economic performance of its major economies.

When an economy grows at a pace considered exceptional as in our case, risk factors may not weigh heavily on economists’ minds. To ignore them, however, would risk the very fundamentals upon which Malta’s economic success have been built: low- cost jurisdiction; ongoing investment in human capital; resourcefulness as an enterprising nation; policies that attract foreign direct investment; and social cohesion funded by an increasing outlay on pensions and social security benefits.

Mindful of what is happening around us and beyond, we need to look continually for ways to stay ahead of the curve. This means further developing new sectors closely connected to digitalisation and that can grow sustainably such as Fintech and Blockchain. The same applies to manufacturing that does not necessarily require large tracts of land.

The recent announcement by Economy Minister Silvio Schembri, that €200 million will be invested in the manufacturing sector creating some 800 jobs, is both welcome and timely.

Last year at a Malta Chamber of Commerce conference, I provided evidence showing that the manufacturing sector was going through a mini-revival with workers employed in the sector now more qualified than in the past.

Further investment in this sector and in sectors that can grow sustainably such as Fintech and Blockchain makes both economic and environmental sense if it helps reduce dependency on sectors such as construction. Thanks to the legislative and policy framework put into place in recent months, sectors such as Fintech and Blockchain can now develop and thrive. This is precisely what our economy needs to continue growing at a pace that is sustainable and that supports social cohesion.

Beyond these sectors, the European Green Deal provides a further opportunity for sustainable growth partly through the Sustainable Europe Investment Plan and the Just Transition Fund. I say “partly” because the financial resources available in the EU budget will prove largely inadequate.

Many have questioned the sustainability of economic growth at levels that are evidently unprecedented in Malta’s economic history

The government will therefore need to seek partnerships with the private sector to fund projects with positive environmental benefits. Such partnerships can create innovative forms of economic activity fully compatible with sustainable growth strategies.

Our economic resilience and our prudent fiscal policy provides an enviable and solid foundation for further economic growth. In this we converge with the European Central Bank’s pro-growth and accommodative monetary policy that aims not only to bring real inflation closer to the inflation target but also to maintain favourable growth conditions while ensuring financial stability. This is vital if we are to continue promoting social cohesion through sustainable public spending.

Equally vital is the Prime Minister’s commitment to address governance in its broadest of meaning. Macroeconomists often ignore the relevance of governance in their modelling of economic growth. Interestingly, a recent academic paper authored by four Chinese economists established that ‘governance quality’ has a positive effect on economic growth.

Moreover, governance quality reduces the negative effects of unsustainable economic growth while enhancing the positive effects of high quality and sustainable economic growth.

The spill-over effect of good governance is hugely relevant, as is trust in the government and its regulatory institutions.

Last week Fitch, DBRS Morning Star, Moody’s and the International Monetary Fund all referred to the political commitment to address institutional governance.

We now need to translate this into action in the same way the government has successfully achieved economic governance, as evidenced by budgetary surpluses and a falling public debt relative to GDP.

Accelerating change is both necessary and timely. True, the rate of change often makes it difficult to strive continually towards innovation, but we have managed so far. We now need to ensure that economic growth policy initiatives are also sustainable.