Finance Minister Clyde Caruana on Monday called on the private sector to step up its efforts in forging a new economic direction for Malta.
The government, he said, will meanwhile support the private sector as it becomes the driving force that brings about change.
Caruana was speaking at a Central Bank seminar held on Monday morning, in which the Bank’s annual Financial Stability report was presented.
Caruana told delegates that business leaders and entrepreneurs need to rise to the challenge and lead the way in shaping Malta’s economy, while the government must support this change by cutting down on inefficiencies and problems that have characterised Malta’s economic model in recent years.
“We tend to expect that change is brought about by government but it should be the other way around.
"Government is not there to bring about change, it is there to support change. Entrepreneurs should bring about new ideas about the way our economy should develop in the foreseeable future.”
This is especially important, Caruana said, in a world in which people “are no longer just after income, but after the general improvement in their wellbeing”.
'The end must stay the same, but the means has to change'
Caruana once again reiterated the need for sweeping changes to Malta’s economic model which will bring about economic growth through more sustainable means.
Admitting that this is “easier said than done,” Caruana argued that “while we need to continue to enhance economic growth, it doesn’t mean that the path has to be the same as in past years. The end result has to be the same, but the means has to change”.
Striking an optimistic note, Caruana argued that, unlike most EU member states, Malta has the luxury of being a small country, where change can be embraced swiftly.
Caruana painted a picture of a rapidly changing economic sector around Europe, saying that the shocks that the world has experienced over recent years, most notably the pandemic and the Ukraine war, have forced European leaders to realise that they need to be faster and bolder in their decision-making.
“We used to take ages to find a compromise. It is now a completely different ball game. Things are moving in a very fast way.”
Taking Europe’s green deal as an example, Caruana claimed that while these policies would previously have led some EU leaders to “call for caution or a slower pace”, finance ministers around the bloc are now “more adamant than ever that Europe needs to double or triple its efforts for the green revolution to take place”.
Caruana argued that similar bold decisions need to be made in Malta, saying that when looking at the available tools to address future challenges, “the choices become more narrow and obvious”.
According to Caruana, Malta’s economy performed well in recent years thanks to the sector’s ability to unlock untapped resources, such as groups of people who were inactive in the labour market, and in removing certain bottlenecks that were preventing the economy from performing to its full potential.
However, he admitted, this had led to inefficiencies and poorly managed resources, with the government having the responsibility to “think outside the box” to cut down on waste and free up resources that are not being used efficiently.
Quipping that he leans towards the right wing of the political spectrum on the issue, Caruana said that rather than introducing new taxes, the State needs to remain as lean as possible to cut down on waste.
“The tax burden is enough - there is no need to introduce new taxes - but we need to ensure that they are spent in an efficient way.”
Malta’s financial system shows ‘considerable resilience’
The seminar was opened by Central Bank governor Edward Scicluna, who told delegates that while the “Maltese financial system has shown considerable resilience to shocks in the recent past”, events earlier this year show that the sector needs to remain vigilant.
Referring to the failure of several US banks, most notably Silicon Valley Bank, in the span of a few days in March 2023, Scicluna warned that “the banking turmoil seen last March was a powerful reminder of the challenges we face".
"A stable and resilient financial system is a prerequisite for price stability," he added.
Alan Cassar, the Central Bank’s Chief Officer for financial stability, told the seminar that according to research by the Central Bank, local banks “are able to support extreme stress scenarios thanks to strong and robust liquidity buffers”.
However, Cassar warned, the financial strain on households is becoming more pronounced, with almost 10% of households now being particularly vulnerable.
Nonetheless, the bank’s analysis found that households on the whole remained resilient in the face of the rising inflation that has characterised the past year.