Last week, I published an article on current geopolitical realities and discussed these topics in television interviews. Yet my main focus remains the pressing national challenges. The Maltese economy is performing well, and continued growth is crucial. The International Monetary Fund endorsed Malta’s strategy, which now requires assessments every two years rather than annually. These are positive developments, and the current administration deserves credit for generating wealth to support the economy. Over the past decade, GDP per capita has nearly doubled, and Malta’s fiscal position remains within the rules and the Stability and Growth Pact’s 60% debt-to-GDP threshold.
However, strong macroeconomic performance does not automatically translate into equitable outcomes, and this is where the story becomes more complex. Despite strong headline economic indicators, certain segments of society remain unable to purchase property. Aggregate data often masks the specific challenges individuals face. As I noted in a recent article, first-time buyers, as well as divorced and single individuals, are struggling to find affordable options within their budgets. And struggling not just financially but also to find suitable properties, in terms of space and quality. While statistical data is valuable for monitoring trends, it is necessary to examine the underlying causes of these structural challenges. Interpreting data requires sound economic judgment. I have learned this from Thomas Piketty’s book Capital in the Twenty‑First Century. Certainly, multiple factors contribute to these persistent structural deficiencies. Indeed, economic growth benefits many, but those who own financial assets and real estate tend to benefit disproportionately. Although these individuals have assumed greater financial risk and paid higher interest and capital costs, it is also evident that digitalisation has fundamentally altered economic dynamics and exacerbated disparities.
Well, the impact of technological advancement is evident across various aspects of daily life. For instance, technology has transformed the way we book holidays, satisfy our needs instantly, and maximise profits and make purchases. Previously, travellers chose traditional hotels, but now platforms such as Booking.com and Airbnb offer a wide range of holiday apartments. Similarly, booking flights has shifted from travel agents to direct online reservations with low-cost airlines like Ryanair, facilitating affordable travel for both residents and inbound tourists. As a result of digitalisation, increased airline competition, and simplified travel, tourism has grown significantly. I am encouraged to see individuals purchasing and refurbishing properties, notably in Urban Conservation Areas (UCA), to offer as holiday apartments. This strategy preserves cultural heritage by generating income. We are hitting two birds with one stone. And I certainly want to see additional investments in preserving our cultural heritage. Surely, with the rapid development of artificial intelligence, further progress is anticipated in the creation of additional tourism and hospitality sectors. However, some segments are being pushed out of the housing market.
This divergence between opportunity and exclusion is visible at the community level. This underscores why aggregate data fails to reflect the lived experiences of all residents. The effects of these changes are evident in my own community of Cottonera, namely in Bormla, where I have observed palaces and historic houses being purchased and renovated as holiday apartments. In Malta, if we align ourselves with economists who believe in rational expectations, we can deduce that the property market is following such a trajectory. However, some reject the notion of rational expectations and argue that they are driven by psychology rather than optimisation. In fact, Keynes coined the term “animal spirits” to refer to the psychological drivers of confidence, fear, optimism, and herd behaviour. Keynes argued that investors follow sentiment, while consumers follow confidence, with the markets following waves of optimism and pessimism.
In reality, Maltese behaviour is reflecting a blend of both frameworks. Maltese households and investors are anticipating that tourism will continue to perform strongly. They are fully aware that the tax regime for rental income remains efficient and predictable. As a result, many are purchasing and renovating additional properties for holiday accommodation. They are acting today based on the returns they expect to earn in the future, driven primarily by sentiment and confidence. Yet property dynamics are not driven solely by tourism. Besides increased tourism, demand from economic migrants have also contributed to rising property prices. While economic growth is a factor, it is not the sole driver of higher rents and prices. Although Malta’s property prices have increased in recent years, they have often remained below the European Union average, and aggregate statistics do not reflect those who continue to face difficulties in purchasing property. In response, I have advocated for the regulation of temping agencies, and the introduction of a skills’ pass to moderate labour inflows and better assess Malta’s workforce requirements. There is a need to transition from labour-intensive sectors to higher-productivity industries and to plan workforce development accordingly. The International Monetary Fund has also highlighted that labour-intensive sectors are nearing saturation and that Malta must diversify. While Malta Vision 2050 outlines long-term goals for new industries, immediate and medium-term measures are also necessary.
Labour market pressures are just one structural challenge. Regulatory measures have improved management of worker inflows and skill requirements, but further progress is needed as labour shortages still constrain growth. It is imperative to transition to higher-productivity sectors. For example, the government should probe why machinery remains idle and road projects are delayed, reducing productivity and quality of life. Residents are affected by inefficiencies, inconvenience, and increased dust. A flyover can be built in under 11 months, so it is unreasonable for basic roads to take as long. Given these challenges in productivity and labour market efficiency, infrastructure efficiency must be treated as an economic priority, not an afterthought. To address these challenges, infrastructure projects must be expedited and completed within a defined timeframe. Prolonged delays often result from inadequate coordination among entities responsible for utilities or from contractors being overextended. Such inefficiencies lead to unproductive investments that displace more productive initiatives. Projects should only commence if they can be completed efficiently. Additionally, investment in renewable energy must be accelerated, moving away from perpetuating reliance on subsidies toward more productive, future-oriented investments. This issue requires serious attention in the medium-term.
In conclusion, upgrading the skills of permanent residents must be prioritised to ensure Malta’s continued progress and shared prosperity. Addressing skill mismatches will enable us to maximise the benefits of economic growth, strengthen our workforce, and create a more inclusive future. As the IMF’s report highlights, these steps are crucial for meeting Malta’s long-term ambitions. Now is the time for decisive action to secure sustainable growth that benefits all segments of society.
