Times of Malta in conjunction with Seed is serializing the economic report Agile. Perspectives on Malta’s economy post COVID-19. The report was authored by JP Fabri, Glenn Fenech, partner and senior consultant at Seed, and University academics Professor Vincent Cassar, Dr Stephanie Fabri and Dr Jonathan Spiteri. The full report can be read here. 

Notwithstanding the advances made, various structural challenges remain including infrastructure, access to finance, innovation, human resources and judicial reforms. To this end, Government is embarking on a broad and wide infrastructure investment programme particularly focused on improving the road network. This investment programme is set to continue supporting private sector investment and job creation in the coming years. This is not an exhaustive list of the challenges that Malta faces yet these are the most pertinent in these times we are currently facing. 

Access to credit by SMEs remains challenging in Malta with higher than average interest rates. This led to the creation of new financing mechanisms including the new markets on the Malta Stock Exchange. The Malta Development Bank was also set-up to support this area and to roll-out financing schemes for SMEs. This, in addition to a low public spending on R&D, has affected Malta’s innovation performance and remains one of the weakest amongst EU member states; 0.5% of GDP as opposed to the EU average of 2.2 per cent. These areas become even more critical once the crisis passes and Malta seeks to chart out its recovery post the COVID-19 crisis. 

Justice reforms are also required to support the private sector primarily in key areas such as insolvency. This becomes even more critical at this juncture as several companies will face insolvency. Despite recent progress, the time needed to resolve civil, commercial, administrative and other cases in Malta is still among the highest in the EU.

Although advances have been made in education, Malta still has a high early-school leaver rate compared to the EU average. Also, the basic skills attainment among young people is still weak and strongly influenced by socio-economic status. In addition, large gaps remain in tertiary educational attainment. These weaknesses underpin widespread skills shortages, which have become a barrier to investment according to survey evidence, as well as the increasing dependence on higher-skilled foreign workers. 

Weaknesses have also been identified in Malta’s financial and AML/CFT supervisory frameworks with a deadline for implementation of reforms by MoneyVal later this year. These reforms are necessary to safeguard Malta’s reputation and standing as an international centre for professional and financial services. Failure to pass the review by MoneyVal will present new economic challenges for Malta and will primarily affect the sectors which have contributed significantly to Malta’s strong recent positive performance. 

Albeit being diverse, the challenges Malta faces are structural in nature. It is therefore essential that these addressed in a long-term approach. The challenges outlined are very much focused on the key elements that might impinge on a long-term economic recovery plan. More than ever, this is the time to start addressing such challenges in order to build a better functioning economy.