Updated 2.15pm, adds PN statement
- 'Unabated' growth in house prices needs monitoring
- Institutional shortcomings hindering effective detection of corruption
- Public finances will come under pressure from costs of ageing
Persistently high student underachievement and early school leaving make it difficult for Malta to meet the demand for skilled labour, the European Commission has warned in a working document.
In the Commission’s 2020 winter assessment of Malta, the EU executive body said poor educational outcomes were set to impede future growth.
These poor educational outcomes also had long-term implications for social inclusion, because children from socially disadvantaged families are less likely to benefit from the best education opportunities and are likely to lag behind their mode advantaged peers.
The Commission said measures had to be taken to make education more inclusive.
It said the average performance of Maltese pupils remained below the EU average and an increasingly diverse student population posed challenges for the Maltese education system.
“Increased coordination and more use of evidence-based approaches may make reforms and investment in education more effective,” the report said.
Overheating real estate market
On the property front, the Commission said the “unabated” growth of residential house prices needs close monitoring.
It said there were now signs of overheating in the residential real estate market and surging house prices had also raised concerns about affordability, especially in the rental sector.
The Commission said banks’ exposure to the property market also had to be monitored.
“This is an especially pressing issue given lengthy insolvency procedures and the relatively high ratio of household debt to gross disposable income”.
Public finances and pensions
Public finances will come under increasing pressures from the costs of ageing.
In the long term, Malta’s increase in public pension and healthcare spending is projected to be one of the largest in the EU, albeit from a level much below the EU average, the Commission said.
It said recent measures have aimed at diversifying pension income and increasing pension adequacy.
Pension indexation at levels above increases in the cost of living contributed to better adequacy, but this will weaken public finances in the long term.
The report said recent fiscal surpluses have relied to a large extent on proceeds from the citizenship scheme.
“These proceeds are difficult to predict and may decline over the medium term. Preserving a sound fiscal position will, therefore, become increasingly dependent on expenditure adjustments.”
Fight against corruption
It remains a challenge to strengthen the institutional capacity, with the European Commission pointing to different indicators that indicate perceived weaknesses in Malta’s governance framework, with negative effects on the business environment.
The Commission said institutional shortcomings hindered the effective detection of corruption, while investigations by the police seem to remain “fragmentary”.
Room for improvement exists in the prosecution of crimes related to corruption, abuse of power and money laundering.
Transparency in public procurement also needed to improve, as conflicts of interest are perceived to be widespread.
Health system commended
The Commission commended Malta’s health system for being effective and well accessible.
It said Malta has one of the highest life expectancies in the EU at 82.4 years.
In recent years, substantial falls in treatable and preventable mortality had been made.
The report did, however, flag what is termed as behavioural risk factors, such as the high obesity rates.
“A high rate (70%) of family doctor visits carried out in private clinics (OECD/European Observatory on Health Systems and Policies, 2019) is the main reason for high out-of-pocket outlays. Despite this, healthcare appears well accessible, as self-reported unmet needs for medical care are very low”.
What progress has been made since last report?
According to the Commission, Malta has made “limited” progress in addressing 2019 country-specific recommendations.
There has been some progress in strengthening the anti-money laundering framework, focussing investment-related economic policy on research and innovations, improving the management of natural resources and energy efficiency and improving inclusive education and training.
The Commission deemed there to have been “limited” progress in ensuring sustainable transport and reducing traffic congestion.
Progress was deemed to have also been slow in strengthening judicial independence and boosting the overall governance framework.
The Commission said no progress was made in ensuring long-term sustainability of public finances by addressing shortcomings of the pension and healthcare systems and addressing features of the tax system that may facilitate aggressive tax planning.
Economic achievements not translated into better quality of life - PN
In a statement, the Nationalist Party noted that a key conclusion of the report was that the country's economic achievements have not translated into a better quality of life for the population.
While acknowledging the high levels of economic growth, the EU highlighted a number of deficiencies which reflected the long-held view by the Opposition that economic success was not being enjoyed by the majority of the population.
The Opposition called on the Prime Minister to take such reports seriously and reflect on the necessary policy actions required to ensure just economic growth.
The PN appealed for a concerted effort to ensure that Malta's success was not measured on raw economic numbers but through the improvement of the social well-being of its population.