The milestone of more than four million tourists in 2025 is, on paper, a success story. Yet beneath the surface lies a more troubling trend. Tourists are staying for shorter periods, and when adjusted for inflation, average spending per visitor has declined significantly over the past decade. This is not a sign of a sector moving upmarket. It is a warning that Malta risks locking itself into a high-volume, lower-yield model that places growing strain on infrastructure, public services and residents, while delivering diminishing returns.

For a small island state with limited space and finite resources, that is not a sustainable formula.

The Malta Chamber’s Rediscover to Align strategy deserves serious attention because it reframes the debate in the right terms. Tourism should no longer be measured primarily by arrivals, but by the economic value each visitor generates and by the quality of the experience offered. In business terms, Malta must improve yield, not simply throughput.

That means the product itself must improve. Tourists will pay more only if they perceive greater value. Cleanliness, maintenance, transport efficiency, public order, well-kept streetscapes and authentic cultural experiences are not cosmetic issues; they are core components of the tourism product. If Malta charges premium prices while delivering substandard infrastructure or deteriorating public spaces, it will quickly lose credibility as a destination.

This is why the Chamber’s insistence that “if it works for residents, it will work for tourists” is more than a slogan. It is sound commercial logic. Residents’ quality of life, urban aesthetics and local character are not external to the tourism economy; they are part of its value proposition. If communities are overburdened and localities are allowed to decline, the visitor experience inevitably declines with them.

Equally important is the Chamber’s warning against treating tourism as a silo. Tourism policy cannot sit solely within the remit of the Malta Tourism Authority or the tourism ministry. It is shaped every day by decisions in planning, transport, environment, heritage, local government, policing and enforcement. If these sectors remain fragmented, Malta will continue to undermine its own competitiveness.

This is where government must act decisively. The Chamber has presented a detailed strategy. Its proposals on aesthetics, local council involvement, infrastructure renewal, smarter management of visitor flows and stronger cross-ministerial coordination should be treated as an economic priority.

Malta is at a crossroads. It can continue to chase ever higher arrival figures while the real value of tourism erodes, or it can build a smarter model based on quality, resilience and premium positioning. For business, the answer should be obvious: long-term profitability lies not in doing more, but in doing better.

The post Editorial: Malta must stop chasing tourist numbers and start building value first appeared on The Malta Business Weekly.

“These are truly testing times. Political debates are heating up as parties prepare for a general election, while international developments, especially the conflict in the Middle East, are creating chaos for businesses with a combination of demand and supply-side pressures,” he begins.

Despite these challenges, Refalo points out that Malta’s economy continues to grow. “Growth is encouraging but it also brings pressures, especially on human resources,” he says. “Companies struggle to fill vacancies and competition for talent is intense. More often than not, private firms must rely on foreign workers to keep operations running.”

This, he says, ties directly into the electoral cycle.

“Malta’s competitiveness must be preserved. Political promises must be realistic and affordable. Populist pledges, like offering every type of leave imaginable, might appeal to voters but threaten long-term economic stability and put further pressure on the already increasing national debt. Policy should be evidence-based and sustainable.”

The key word for Refalo is certainty.

“While we have no control on most of the developments taking place around us, we must not fuel further uncertainty ourselves. We cannot afford surprises. Our businesses, workers and economy deserve policies grounded in reality and focused on sustainable long-term growth,” he adds.

He singles out the public sector as a particular concern. “Unfortunately, we continue to see skilled employees attracted away from the private sector for government roles where their abilities are often underused. Not to mention social media adverts that promote public sector jobs under the premise of possibly working less. This practice destabilises businesses and disrupts the labour market.

Refalo frames these concerns within a broader vision.

“We strongly support initiatives such as Malta Vision 2050, which push for sustainable, inclusive and productive growth. Every decision carries an opportunity cost. True leadership requires choosing what serves the nation’s long-term interest. We cannot afford to get it wrong; the future depends on decisions we take today.”

Refalo is particularly concerned about issues related to Malta’s human resources, especially Malta’s labour migration framework. While the policy has been welcomed as a step toward addressing workforce challenges, including skills gaps and the need to attract and retain third country national workers, it still faces practical hurdles, he says.

“We are all for initiatives that help stabilise the labour market and bring in the skills our economy needs,” he explains. “But excessive costs, unclear procedures and under-resourced regulatory bodies are creating unnecessary burdens for both employers and workers. Policies must be workable and enforceable in practice, not just ideal on paper.”

Debates over flexible working arrangements, including the idea of a four‑day week, have also grown. “Flexibility can work,” Refalo says, “but only when it is underpinned by higher productivity, technology, automation and investment in skills. Our researched position shows that most employers do not yet support the idea of a blanket four‑day measure for Malta. Labour shortages, rising costs and operational realities vary across sectors. Work‑life balance is important but solutions must be grounded in the realities of individual firms. At the same time, social dialogue remains non-negotiable. Refalo expressed disappointment at the association’s exclusion from recent government-driven, technical committees related to employment and industrial relations.

“Malta enjoys industrial stability because responsible partners engage in constructive dialogue. Excluding employers from committees discussing employment and industrial relations is unacceptable. Decisions made without our involvement risk imbalance and undermine the process.”

In conclusion, Refalo delivers a clear message: Safeguarding Malta’s economic future requires collaboration, foresight and a refusal to compromise on principles for electoral expediency.

“We stand for policies that drive sustainable growth and which are designed to strengthen the country’s competitiveness. We also stand for the acceptance and practice of core values in the advancement of our society,” Refalo continues while stressing “we are steadfast in our belief that ethical principles provide the foundation for economic and social policies that genuinely serve the national interest. In this light, we have recently commented that public officials must lead by example and demonstrate integrity, transparency and full accountability in the conduct of their duties.”

In this context, Refalo frames the association’s mission as more than advocacy, but one which serves a wider economic cause.

“Our role is to ensure that the voices of employers are heard, that labour policies work in practice, and that long-term growth is underpinned by integrity and ethical employment practice. We are committed to being a constructive partner in making those decisions count.”

The post Malta cannot gamble its competitiveness for election pledges – Malta Employers president first appeared on The Malta Business Weekly.

I have seen some numbers and plots that, in truth, are a little worrying from a global economic perspective. Everything was revised downwards, due to this conflict, not least global economic growth. This week, President Trump lost his patience with the Iranians, to the point of asking them to open the ahem, Strait. However, the Iranians seem to be defiant, and they are totally ignoring the USA. To make matters worse, Iranians are telling EU countries that the passage is open to them, but not to the USA. Those allies aiding the USA will be targeted by Iran, and many merchant vessels passing through will be targeted. Under UNCLOS and the Law of the Sea, the passage cannot be blocked. However, no insurance company will cover the trade and the stock carried on those vessels. And this is making the situation even worse. So, besides the oil price spikes, the problem is also one of supply. By the time this article was written, the US and Iran had agreed to a ceasefire brokered by Pakistan. This, though, does not include Lebanon, and Israel seems to be forging ahead with their military interventions.

The EU has already signalled a move to ration fuel by encouraging carpooling and public transport, reducing air travel, and lowering the speed limit on highways to reduce fuel consumption, especially diesel. All this shows that the economic strain is now inseparable from the political and military escalation. Now that a two-week ceasefire has been agreed, there is a possibility that oil, LNG and other related energy commodities will pass through the Strait as it will be open. However, as I reiterated, it does not guarantee insurance of commodities, and the risk premia may be quite high. This week, the US, or better the President of the United States, resorted to Truth Social, going further in saying that if Iran is not ready to make a deal by the time of the deadline, an entire civilisation will die and will not come back. That threat is an ugly one. As the understanding is one that would go to lengths we haven’t seen since the Second World War. God forbid that something so ugly occurs.

Certainly, if Iran’s nuclear infrastructure has been decimated by the US, the regime is arguing that sanctions imposed on it might as well be lifted. There is no threat anymore. Meanwhile, Israel kept bombing Lebanon, pursuing Hezbollah members. And the entire region is in chaos. And naturally, this chaos is feeding directly into the global economic outlook. The global economic figures are not looking good. The IMF revised the economic growth downward. And if we carry on like this, next month will be crucial for feeling the pressure of the price spike. Inflation will pick up, wreaking havoc on many EU and Western economies. As many want this conflict to end as soon as possible, it doesn’t seem to be the case, even though a ceasefire has been agreed upon.

Even if the war stops, stability will take longer to restore. What I am intrigued to see is the EU at the negotiations and mediation table. The EU is looking conspicuous. By the EU, I do not mean the European Parliament. The latter lacks competence in foreign affairs and defence. They can only issue political statements that, in truth, only fuel further problems, misunderstandings and chaos. Some of the EU parliamentarians do not even know the history of Iran. When they speak, they look idiotic by the verses they write for themselves and the citations they cite from uninformed history books. And while the EU struggles diplomatically, it is also struggling economically.

What will surely hit us here is the increase in oil prices, although after the temporary ceasefire, prices eased. We must make sure to cushion this impact. The EU economy cannot handle such a shock. And the EU must intervene with its budget to look after its citizens. We cannot have a situation where money is spent on defence while people do not have food on their table. It’s becoming even more difficult for the EU to understand the economies. They are just trying to stay within the rules, which were designed years before any conflict or shock and do not make sense in today’s context. When meeting with economic operators in the industry, they tell you that costs are exorbitant, including compliance, green, and sustainability costs. The EU was not ready to issue legislation on reporting requirements amid a pandemic, a war in Europe, and ongoing conflicts. And the latest revisions were neither proportional to the original text nor a travesty of green initiatives. And this brings us to the reality we must face: many companies have incurred costs and uncertainties.

What we must deal with in the coming month, economically and security-wise, is the result of years of postponement of the EU’s problems. Luckily, in Malta, the GDP grew three times as much as it was in 2013. And we can cushion part of the impact and sustain it for a short to medium-term period. If it were not the case, we wouldn’t be able to sustain all the benefits provided by the PL in government since 2013, not least free childcare, increased pensions, and the public sector wage bill. People must realise that we do not live in a bubble. We are part of the world, and any impacts, regional or global, will affect our economy. The choices we make today will shape our future stability and prosperity. It is crucial that we remain vigilant, adaptive, and ready to take responsible decisions, both as individuals and as a country. The cushioning of these impacts depends on the ideologies of those governing the country. You either choose a government that believes in intervention or a party that believes in the free market. The choice is ultimately yours.

The post We do not live in a bubble here in Malta! first appeared on The Malta Business Weekly.

Chapter 2 documents the development and implementation of a new analytical framework designed to strengthen the Council’s monitoring toolkit. In a small, highly open economy like Malta’s, where market dynamics shift rapidly, the MFAC identified the need for a structured instrument to synthesise diverse indicators into a coherent assessment. The resulting “heatmap” serves as both an early warning system and a monitoring tool to detect emerging macroeconomic and sectoral imbalances.

The methodology involves evaluating 27 distinct indicators across five thematic blocks – Prices and Competitiveness, Labour Market, External Balances, Credit and Financial, and Business Trends – against their long-run averages from 2010 onwards. By utilising Z-scores (measuring standard deviations from the mean), the Council can visually identify “heat” in the economy; large positive deviations appear in shades of orange, while negative deviations appear in blue. This iterative tool allows for a timely, quarterly assessment of whether the economy is operating at, above, or below its historical norms.

So far, the critical insights developed from this tool are that the Maltese economy continues to operate above its long-term historical average, but the “heat” of the rapid post-pandemic expansion is visibly cooling. This suggests a natural transition toward a more mature stage of the business cycle where growth rates align more closely with historical norms. Moreover, indicators signal persistent and extreme structural tightness in the labour market. Most importantly, while nominal wages increased by 4.1% in 2025, labour productivity growth has remained subdued. This has pushed Nominal Unit Labour Costs (ULCs) above their long-term average, posing a direct threat to Malta’s international price competitiveness. Finally, while house price inflation remains above historical norms, it is showing signs of deceleration. Crucially, building activity in Q3 2025 stood below its long-term average, indicating a property market transitioning toward more moderate expansion.

Chapter 3 provides a comprehensive examination of the evolution and composition of general government expenditure in Malta using the Classification of the Functions of Government (COFOG) framework. This international statistical classification groups spending by purpose such as, health, education, and social protection, rather than just administrative categories, offering deeper insight into how public resources are prioritised over time.

The analysis spans the period from 2000 to 2024 and applies a three-effect decomposition framework to disentangle the drivers of spending growth. This framework distinguishes between the GDP effect (spending increasing in line with economic scale), the government size effect (changes in the overall fiscal footprint relative to GDP), and the structural allocation effect (deliberate shifts in spending priorities across different functions). Additionally, the chapter categorises expenditure by its economic nature – rigid (salaries and pensions), operational (intermediate consumption), and discretionary (capital investment) – to assess the government’s flexibility in responding to future fiscal pressures.

The critical insights derived include that social protection, health, and education collectively accounted for 52.1% of total expenditure in 2024. Within social protection, old-age spending (pensions) is the dominant component, totalling €1,366.4 million in 2024 – a reflection of Malta’s demographic shift and a 49% increase in pension beneficiaries since 2010. Moreover, the economic affairs category recorded the fastest growth over the period, reaching 20.3% of total expenditure by 2024. This surge was primarily driven by transport infrastructure investment and energy price subsidies introduced from 2022 onwards.

A three-effect decomposition analysis revealed that the vast majority of spending increases were simply proportional to the expansion of the economy. Interestingly, the overall “size of government”, relative to the economy, actually declined over the period, with the expenditure-to-GDP ratio standing at 37.4% in 2024 compared to earlier years where it fluctuated between 40% and 42%. One has to see if this trend will continue in 2024, as 2025 has seen a steep acceleration of government spending.

Another insight is that intermediate consumption (the cost of running the day-to-day business of government) surged from 12.2% of the budget in 2000 to 19.8% in 2024. This suggests a growing portion of the budget is becoming “locked-in” to operational demands and outsourced contracts.

Finally, unfortunately government R&D expenditure remains a systemic weakness, hovering at less than 0.2% of GDP, drastically trailing the EU average of 0.7%.

In conclusion the MFAC warns that Malta’s current fiscal health relies heavily on strong revenue growth fuelled by domestic demand. As the new EU economic governance framework introduces stricter limits on net expenditure growth, the Council emphasises two strategic imperatives. First, the need to rebalance the growth model by transitioning away from population-driven growth toward a high-value, export-led, and productivity-driven model. Secondly, by enhancing the quality and efficiency of government spending, fiscal space can be preserved by ensuring that expenditure-based consolidations prioritise productive capital investment rather than non-productive recurrent expenditure.

The post Macroeconomic surveillance and fiscal evolution in Malta first appeared on The Malta Business Weekly.

Some argue that rising militarism and a growing appetite for conflict are reshaping the EU in ways they find unacceptable. Faced with all these developments, Malta as a neutral country will face tough choices in the foreseeable future.

What are other EU members doing in their countries to beef up defence spending? To start with, in recent years, Germany has embarked on one of the most significant military modernisation efforts in its post‑Cold War history. Driven by shifting geopolitical realities and the need to strengthen both national and European security, the country is rapidly expanding its defence industrial base.

This expansion goes beyond merely acquiring weapons systems, it also involves large‑scale investment in the domestic production of such components, technologies, and industrial capacity essential for modern warfare. Germany has committed €355 billion through 2041 for new military equipment, on top of a €100 billion special fund.

Apart from munitions, there is a vast expansion in expenditure consisting of combat vehicles, communications and electronics. These categories include thousands of components – sensors, armour systems, electronics, propulsion parts, and more – produced by German industry. By comparison, France’s defence priorities, as outlined in its 2025 National Strategic Review (RNS) and the updated 2024-2030 Military Programming Law (LPM), emphasise strategic autonomy, high-intensity warfare readiness, and a balanced “complete army” model. This contrasts with many other EU countries, which focus more narrowly on territorial defence or specific capability gaps.

Back to Germany, we observe a transformation in its long‑term financial commitment. Berlin has allocated €355 billion through 2041 for new military equipment, supplemented by a €100 billion special fund established after Russia’s invasion of Ukraine. A substantial share of this funding is directed toward categories that rely heavily on component manufacturing – munitions, combat vehicles, communications systems, and logistical equipment. Germany’s strategy also emphasises strengthening domestic defence manufacturers.

Approximately €182 billion in upcoming procurement projects are tied to German companies, with Rheinmetall emerging as a particularly prominent beneficiary. The company appears in more than 50 procurement lines worth over €88 billion, covering armoured vehicles, ammunition, weapons systems, and the specialised components that enable them.

This approach reflects a deliberate effort to ensure that critical technologies from fire‑control systems to missile housings are produced within Germany’s borders. The expansion of component production is especially visible in several key areas. In the field of munitions, Germany has placed orders for thousands of DM22 anti‑tank mines and is replenishing ammunition stocks depleted by support to Ukraine.

In ground systems, the procurement of FLW 100 and FLW 200 remote weapon stations requires domestic manufacturing of optics, stabilisation mechanisms, and electronic subsystems. Germany is also investing heavily in advanced electronics, including explosion‑proof GPS receivers and thermal imaging sights, which demand sophisticated microelectronics and ruggedised engineering.

As can be expected, we note how air defence has become another priority. Germany is constructing a layered air‑defence network centred on systems such as the domestically-produced IRIS‑T SLM, which requires local production of missile bodies, seekers, launchers, and radar components. Even when integrating foreign systems like Arrow 3 or Patriot, Germany invests in domestic infrastructure and electronic support systems to ensure operational independence.

Beyond traditional weapons, Germany is channelling resources into emerging technologies. Investments in loitering munitions, drone swarms, radar satellites, and laser‑based weapon prototypes signal a commitment to future‑oriented capabilities.

These programmes rely on advanced optics, AI-enabled power systems, and digital components – areas where Germany aims to build long-term industrial expertise. Underlying all these efforts is the National Security and Defence Industry Strategy, which seeks to reduce reliance on foreign suppliers and reinforce Germany’s role as a capable and autonomous defence producer.

The strategy includes incentives for local manufacturing, streamlined procurement processes, and support for dual‑use infrastructure that enhances military mobility. By investing not only in finished systems but also in the components and industrial capacity behind them, Germany is positioning itself as a central pillar of European defence. The result is a more resilient supply chain, a revitalised industrial base, and a military better equipped to meet the challenges of an increasingly uncertain security environment.

In conclusion, tiny Malta is faced with realities of the war in Ukraine, the conflicts in the Middle East and the Gulf, so it must wisely prioritise resilience, diversification and diplomacy. Such objectives ought to be focused towards achieving an economy capable of withstanding future economic shocks while seizing opportunities in expanding its GDP levels.

George M. Mangion is a senior partner at PKF Malta

The post Discussing a new outlook for Malta’s defence strategy first appeared on The Malta Business Weekly.

Malta must offer tourists greater value while respecting what residents are willing to tolerate and preserve, The Malta Chamber of Commerce, Enterprise and Industry has argued, saying that the country’s future lies in shifting from high-volume tourism to a higher-yield, better-managed model.

Speaking to this media house, Malta Chamber Board of Management and Council member Alan Arrigo said the organisation’s recently published tourism strategy, Rediscover to Align, is built around the principle of “Managing a Sustainable, Authentic & Resilient Future.” Its core message is that Malta should stop judging tourism success primarily by record arrival numbers and instead focus on how much value each visitor brings to the country.

While Malta has enjoyed record-breaking tourism in recent years, including more than four million tourist arrivals in 2025 for the first time, the chamber believes that raw numbers alone present an incomplete and potentially misleading picture. Arrigo argued that the more meaningful benchmark is average expenditure per tourist, adjusted for inflation. He said that authorities and operators naturally work to improve whichever metric is prioritised, and if the focus remains solely on arrivals, Malta risks pursuing “growth for growth’s sake.”

The chamber’s figures suggest that this is already becoming a concern. Although expenditure per tourist has risen in nominal terms, inflation-adjusted data tells a different story. The Rediscover to Align report shows that average real spending per tourist fell from €919.09 in 2015 to €771.01 in 2025, a drop of 16% over a decade. At the same time, the average length of stay declined by 20%, from 7.9 nights in 2015 to 6.3 nights in 2025. Total tourist expenditure still reached €3.9 billion last year, but the chamber warns that Malta is at risk of becoming a permanently high-volume, lower-yield destination if it does not change course.

For Arrigo, the answer is not simply to charge tourists more, but to offer them more. If Malta wants visitors to spend more, it must give them a stronger sense of value through a better overall experience. That means cleaner public spaces, improved maintenance, stronger infrastructure, and more curated, authentic experiences that can justify a premium price point. If tourists feel overcharged for a mediocre product, he warned, Malta risks sliding further into a downward spiral in which value perception deteriorates and higher-yield tourism becomes harder to attract.

The chamber’s strategy, published this month and containing 115 proposals, is intended as a ready-made blueprint for government. It calls for a shift towards what Arrigo described as “not handling more but handling it better.” The aim is to align operators, authorities and residents around a common objective: extracting more value from each tourist visit while improving the experience for everyone involved. If Malta handles tourism better, he said, tourists will stay longer, spend more, return more often and strengthen the sector in a more sustainable way.

A central part of that vision is the principle that tourism cannot be separated from residents’ quality of life. If it’s not working for residents, it’s not working for tourists, Arrigo said, arguing that local wellbeing is not secondary to the tourism product but integral to it. Tourists come to experience local culture and character, not a hollowed-out destination stripped of its authenticity. If residents feel overwhelmed, neglected or alienated, the visitor experience will eventually suffer too.

That is why the chamber is placing significant emphasis on preserving Malta’s distinctiveness. Arrigo said the islands’ culture, environment, landscapes and local feel are among the country’s strongest tourism assets. If these are protected and enhanced, Malta can continue to command value as a unique destination. If they are eroded, Malta risks becoming interchangeable with countless other destinations competing on price rather than quality. No-one in the world is Maltese except Malta, he said, underlining the argument that Malta’s uniqueness should be treated as a premium product.

One of the more notable concepts in the chamber’s approach is the idea of respecting what residents are willing to change. Arrigo acknowledged that overtourism can be difficult to measure precisely, but said negative public perceptions, such as those seen in cities like Barcelona, can be reduced if policymakers pay attention to residents’ tolerance levels. Using the concept of a “limit of acceptable change,” authorities can identify the point at which locals begin to see tourism’s social and environmental costs as outweighing its economic benefits.

This philosophy feeds into several practical proposals. Among them is a national aesthetic and landscape policy to safeguard streetscapes and scenery, alongside a renewed Strategic Plan for the Environment and Development (SPED), which has lapsed. Arrigo said a revised SPED should clearly distinguish commercial from residential areas, helping to preserve neighbourhood character and avoid uncontrolled encroachment. The chamber also believes local councils should play a far bigger role in shaping their localities, from the design of public squares and visual standards such as colours and umbrellas, to upkeep and maintenance. In this way, councils would represent residents more directly while contributing to the overall quality of the tourism product.

The strategy also calls for a central coordinating entity to work with residents and local councils on such matters, reflecting the chamber’s belief that tourism is a vast value chain in which the weakest link can damage the entire experience. Arrigo stressed that lower-end details, from cleanliness to visual coherence, matter just as much as high-profile attractions if Malta wants to raise standards across the board.

Another key theme is the chamber’s warning against government working in silos. Arrigo said the biggest threat to Malta’s tourism product is a fragmented approach in which ministries and agencies operate independently without understanding how their decisions affect the visitor and resident experience. Tourism, he argued, is not just the responsibility of the tourism ministry or the Malta Tourism Authority. Planning, transport, heritage, education, policing, the environment, cleanliness and enforcement all have a direct impact on the sector. If these sectors are not coordinated, “things will break,” damaging both quality of life and the tourism offer.

The report therefore urges a whole-of-government approach, involving every relevant ministry in implementation. It also promotes the use of data and smart systems to better manage tourism pressures. Examples include dynamic pricing in crowded hotspots such as Valletta to influence visitor flows, and smart bins that alert authorities when collection is needed. These measures, the chamber says, are intended to improve efficiency, manage congestion and maintain standards in real time.

Ultimately, Arrigo said Malta is at a crossroads. If it continues to chase tourism growth through volume alone, it risks undermining the very qualities that make the islands attractive in the first place. But if government embraces a coordinated, quality-first strategy focused on infrastructure, aesthetics, resident wellbeing and authentic experiences, Malta can build a more resilient and profitable tourism model. In the chamber’s view, Rediscover to Align is a strategy that is ready to be adopted immediately – a blueprint for doing tourism better, not simply doing more of it.

This is an abridged version of an interview carried in The Malta Independent on Sunday on 29 March

The post Malta must pursue better tourism, not just more tourism, The Malta Chamber says first appeared on The Malta Business Weekly.

This article examines whether dismissals prompted by artificial intelligence fall within the concept of redundancy under Maltese law. It argues that while AI-driven workforce reductions may formally satisfy the statutory test, they occupy the outer limits of the doctrine. Where the work output requirement persists and only the human element disappears, the analysis queries whether the proscriptive function of the law shifts from elimination of function to substitution of labour – a distinction that may invite stricter scrutiny by the Industrial Tribunal. The note further considers the procedural obligations that attach to such dismissals, the employer’s duty to explore alternatives, and the extent to which EU law and policy reinforce domestic protections in the context of technological displacement.

Introduction

The traditional understanding of redundancy is deceptively simple and blunt: the job disappears, therefore so does the employee. Artificial intelligence disrupts that simplicity in ways that existing legal frameworks were not designed to address.

Where once a production line might close, or undergo enhancements to the machine-driven aspects of production, and render its operatives genuinely surplus to requirements, the modern employer has the opportunity to deploy automated systems capable of performing the same tasks continuously and at lower cost. The result is the same as a machine replacing a human: the output remains. The economic activity is unchanged. What has altered is the identity of the actor performing the work.  It’s happened before, but in a post-Orwellian environment, the perception of machine substituting the human is more acute.

This gives rise to a more nuanced question: can redundancy truly exist where the work persists, but the human performing it is replaced by an algorithm?

The issue is not merely theoretical. It goes directly to the validity of dismissals, the entitlements of affected employees, and the legal exposure of employers who characterise such terminations as redundancies without properly interrogating whether that label is sustainable.

Maltese Industrial Tribunal reasoning has consistently favoured substance over form in assessing dismissals. That redundancy by reason of structural change is a valid redundancy (mechanisation taking over jobs) was accepted by the Tribunal.¹

It is open to debate today, however, whether the Tribunal would adopt the same point of view without going deeper into whether the function survives in materially similar form.  Of late, Tribunals have shown a willingness to look beyond formal restructuring and examine whether a claimed redundancy is genuine even by taking into account whether “the job still exists”.

AI-driven dismissals, especially if on a large scale, bring that tension into sharp focus.

Legal Framework

Redundancy in Malta is grounded in the Employment and Industrial Relations Act (“EIRA”), which recognises termination as lawful where it is based on a valid reason connected with the employer’s operational requirements.² While the Act does not exhaustively define redundancy, it is understood – consistently with comparative jurisprudence – to arise where the employer’s requirement for employees to carry out work of a particular kind has diminished.

Collective redundancies are governed by the Collective Redundancies (Protection of Employment) Regulations,³ which transpose Council Directive 98/59/EC.⁴ These impose mandatory procedural obligations, including consultation with employee representatives and prior notification to the Director of Employment and Industrial Relations (DIER).

At EU level, the framework is primarily procedural. Directive 98/59/EC regulates the manner in which redundancies are effected rather than defining their substantive validity.⁵ The question whether a redundancy exists remains a matter of national law, albeit one that must be interpreted in conformity with EU principles.

AI and the concept of redundancy

AI-driven redundancies expose a structural tension within the conventional redundancy model. The work continues. The output remains necessary. Only the human input is removed and replaced by automated processes.

On a literal reading of the statutory formulation – namely that the employer’s requirement for employees has diminished – such situations may fall within redundancy. However, this interpretation stretches the concept toward its outer boundary. Redundancy has historically been associated with a reduction in the need for work, not merely a reduction in the need for human labour where the work itself persists.

This distinction is not semantic. It marks the difference between:

• diminution of operational need, and
• technological substitution of labour.

If the latter is accepted uncritically as redundancy, the doctrine risks becoming a vehicle for workforce reduction of a fundamentally different character – one in which human labour is displaced while the underlying activity remains intact or is even expanded.

Genuineness and tribunal scrutiny

Maltese law requires that redundancy be genuine. The Industrial Tribunal is not bound by the employer’s characterisation of the dismissal and will assess the substance of the situation.⁶

Where AI is introduced, the Tribunal is likely to examine:

• whether the role has genuinely ceased to exist;
• whether its constituent functions continue in materially similar form; and
• whether those functions have simply been reallocated to automated systems.

A redundancy driven by operational necessity is legally distinct from one driven purely by efficiency or cost optimisation. While cost considerations may form part of an employer’s rationale, they cannot, without more, justify a redundancy where the underlying work remains substantially unchanged.⁷

The risk is that a purported redundancy may be re-characterised as an unjustified dismissal, with the consequences that follow under Article 36 of the EIRA.⁸

Procedural obligations

Under the Collective Redundancies Regulations, employers must:

• consult employee representatives in good time and with a view to reaching agreement; and
• notify DIER prior to implementing dismissals.⁹

These obligations are mandatory and independently enforceable.

In the context of AI-driven restructuring, consultation must be meaningful. It requires the employer to explain:

• the rationale for automation;
• the selection of affected employees; and
• the alternatives considered, including redeployment and retraining.

Consultation conducted after the decision is effectively finalised risks being treated as a mere formality and therefore non-compliant. This is consistent with the interpretation of Directive 98/59/EC by the Court of Justice, which emphasises the effectiveness of consultation as a substantive safeguard.¹⁰

Selection and alternatives

Employers must apply objective and non-discriminatory selection criteria and must consider whether affected employees can be retained through redeployment or retraining.¹¹

AI does not necessarily eliminate all human involvement. Many automated systems require:

• supervision;
• quality assurance;
• exception handling; and
• system training or calibration.

Accordingly, the employer must demonstrate – on the evidence – that such alternatives were genuinely explored and found to be unviable. A failure to document this exercise may be taken as evidence that it was not properly undertaken.

Unfair dismissal

Under Article 36 of the EIRA, a dismissal must be based on a valid reason and carried out in accordance with a fair procedure.¹² These requirements are cumulative.

A dismissal presented as redundancy will fail the validity test where the redundancy is not genuine. Even where a substantive justification exists, procedural defects – such as inadequate consultation or failure to consider alternatives – may independently render the dismissal unfair.

EU Law and policy context

Directive 98/59/EC establishes a procedural baseline for collective redundancies but leaves substantive definitions to national law.¹³

However, broader EU instruments, including the European Pillar of Social Rights, articulate policy commitments to:

• fair working conditions;
• protection against unjustified dismissal; and
• support for workers affected by labour market transitions, including technological change.¹⁴

While not directly enforceable in the same manner as directives, these instruments exert interpretative influence. Where domestic law admits of more than one reading, an EU-conforming approach may favour stricter scrutiny of dismissals arising from technological substitution.

Transfer of business

The impact of the acquired rights protection regimen also bears some consideration.  The law, prompted by EU-level regulation, tends towards protection of workers whose job has been “moved on”.  In this case, one is looking at moving the job to ChatGPT or Claude or Perplexity (this one is invented) but there’s something to be said for this aspect also having an impact.

Conclusion

AI-driven redundancies may occupy contested legal ground. While they may satisfy the literal wording of the statutory test, they challenge the conceptual foundations of redundancy by decoupling the disappearance of work from the dismissal of workers.

They therefore attract heightened scrutiny. The Tribunal is likely to examine not only whether the employer’s need for employees has diminished, but also whether the underlying work has in fact disappeared or has merely been reassigned to automated systems.

Employers contemplating AI-driven workforce reductions must engage seriously with both the substantive and procedural dimensions of redundancy. These are not formalities to be addressed retrospectively, but conditions that determine whether the redundancy label is legally available.

The trajectory of the law is already discernible: dismissals that substitute human labour with algorithmic processing, without a genuine diminution in the work itself, will be treated with caution. Those who treat this terrain as settled rather than contested do so at their peril.

Andrew Borg-Cardona is a lawyer, graduated in 1980, with a particular interest in employment law.

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Footnotes

1. See generally the approach of the Industrial Tribunal favouring substance over form in dismissal cases under Chapter 452 of the Laws of Malta. (See also GWU v De La Rue 1998 per Debono C et)
2. Employment and Industrial Relations Act, Chapter 452 of the Laws of Malta, Article 36.
3. Subsidiary Legislation 452.80, Collective Redundancies (Protection of Employment) Regulations.
4. Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies.
5. Ibid., particularly Articles 2–3.
6. EIRA, Article 36; see also consistent Tribunal practice assessing the real reason for dismissal.
7. Compare UK jurisprudence for persuasive guidance: Murray v Foyle Meats Ltd [1999] ICR 827 (HL), confirming that redundancy may arise where the employer’s need for employees diminishes, though not determinative in Maltese law.
8. EIRA, Article 36(2).
9. Subsidiary Legislation 452.80, Regulations 4–5.
10. Case C-188/03 Junk v Kühnel [2005] ECR I-885, emphasising the timing and effectiveness of consultation.
11. Derived from general principles of fair dismissal under EIRA and Tribunal practice.
12. EIRA, Article 36.
13. Directive 98/59/EC, cited above.
14. European Pillar of Social Rights (2017), Principles 5 and 7.

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I believe it is useful to understand how Malta’s public finance progressed in the last six years, from the last year before Covid in which we had a surplus, that is 2019, all the way to 2025.

The government’s revenue grew by roughly €3.18 billion over these six years. The engine of this growth has shifted from corporate tax in the early years to Social Security and VAT in the later years.

Year-on-Year Government Revenue (Millions of €)

As can be seen above, Government Revenue plummeted in 2020 due to the pandemic. The 2021 surge was not just recovery, but the start of a massive increase in Income Tax receipts from the financial and gaming sectors. Then in the 2023-2024 period VAT and Income Tax jumped significantly. As wages rose and prices for goods increased, the government’s “cut” grew proportionally.

Now in 2025, for the first time, Income Tax actually dipped (-€51m) while Social Security (+€148m) became the primary growth government revenue driver, likely indicating that while corporate profits may have stabilised (or possibly dipped), the labour market (employment volume) remained strong.

On the other hand, Government Expenditure has scaled more aggressively, rising from €4.88 billion to €8.90 billion. The primary culprit is Programmes and Initiatives, which now consumes nearly half of the entire budget. The Programme & Initiatives expenditure category acts as a “catch-all” for the government’s direct spending on social services, subsidies, and national obligations that are not related to civil service wages or the day-to-day running of a specific department.

Year-on-Year Government Expenditure Shifts (Millions of €)

As can be seen above between 2022 to 2025, the Programmes and Initiatives category exploded. This includes the energy and fuel subsidies and social benefit increases. Personal Emoluments (civil service wages) grew by 62% since 2019. In 2025 alone, this rose by €149m due to new collective agreements across health and education. While Interest payments stayed flat or fell until 2022, but as debt crossed the €10 billion mark in a higher-interest environment, the cost to simply service that debt (interest) has jumped 70% in just three years (2022 to 2025). In 2019, the government spent roughly €13.4 million per day. By 2025, that figure rose to €24.4 million per day.

The government finance 2025 data released on 27 March shows a worrying trend as total overall government revenue growth is slowing (+2.7%) while Expenditure growth is accelerating (+7.3%), as Income tax revenue has not grown in 2025. In 2025 government revenue has grown almost entirely dependent on Social Security contributions from a growing workforce and VAT.

Now some analysis of the sustainability of Malta’s public finances, in 2025 and in the near future, considering the present geopolitical scenario.

Malta’s economic reporting is characterised by significant GDP upward revisions as initial quarterly estimates are replaced by more comprehensive annual data. For 2023, the nominal GDP was initially reported at approximately €19.37 billion, only to be revised upward by 6.6% to a final figure of €20.65 billion. A similar pattern emerged for 2024, where the first provisional estimate of roughly €21.5 billion was eventually adjusted to €23.10 billion, representing a 7.4% increase.

As of the March data release, the provisional GDP for 2025 is estimated at €24.53 billion. If we apply the average revision rate from the previous two years (approximately 7%), the final GDP for 2025 is likely to be revised toward €26.25 billion by the time the final accounts are settled. Based on the NSO’s reported Consolidated Fund deficit of €823.9 million, this adjusted economic denominator would result in an annual deficit of 3.14% of GDP. This figure is particularly significant as it brings Malta remarkably close to the 3% threshold mandated by the EU’s Stability and Growth Pact, suggesting that while the absolute deficit increased in 2025, the sheer scale of economic expansion continues to provide a crucial buffer for national fiscal sustainability.

Looking forward, one has to consider that it is very likely that government expenditure would have to increase further in 2026, as it will have to pay higher fuel and energy subsidies as international oil and gas prices have soared due to the Iran war. In the meantime, if Malta has the predicted real economic growth rate of 3.8% in 2026 plus an inflation of 3.5% the nominal GDP for 2026 would be approximately €28 billion. If we were to assume that Malta would hit a higher deficit level of around €1 billion in 2026 (mainly due to increased fuel and energy subsidies), we would hit a deficit to GDP ratio of 3.5%-3.6%, which would delay our trajectory from hitting the 3% level.

Malta’s fiscal narrative between 2019 and 2025 reveals a sophisticated paradox: a government whose daily spending has nearly doubled – from €13.4 million to €24.4 million – yet remains anchored by an economy that consistently outpaces its own preliminary growth estimates. The transition from 2019 to 2025 highlights a shift toward a high-spending, subsidy-heavy model. However, the 2025 data signals a structural pivot that warrants caution. For the first time in this period, Income Tax revenue has dipped, leaving the state increasingly dependent on VAT and Social Security contributions from an expanding workforce to fund its obligations.

With Programmes and Initiatives now consuming nearly half the budget and debt-servicing costs jumping 70% in three years, the margin for error has narrowed. Looking ahead to 2026, rising geopolitical energy costs are expected to strain Malta’s fiscal sustainability, making it increasingly dependent on maintaining strong real growth (projected at 3.8%) to keep pace with mounting expenditure.

The 2026 fiscal outlook suggests that Malta is entering a high-stakes race between economic expansion and exogenous shocks. While a projected €28 billion nominal GDP provides a formidable defence, any further escalation in geopolitical energy costs could push the deficit toward €1 billion, potentially stalling the nation’s trajectory toward fiscal consolidation.

The post Malta’s fiscal tightrope first appeared on The Malta Business Weekly.

The President of the United States has threatened to withdraw security guarantees to NATO allies if they do not participate in the conflict in Iran and contribute to safeguarding the stability of the Strait of Hormuz. Europe’s security – encompassing both energy and defence – remains heavily dependent on the transatlantic relationship. The President stated that allies must either help maintain the stability of the Strait of Hormuz or purchase energy from the United States, which he claims is abundant in supply. Donald Trump has branded EU allies as “freeloaders”, reiterating his position that the United States should not increase defence spending to protect them unless they support his efforts regarding the Strait of Hormuz. This pressure adds another layer of complexity to Europe’s already fragile energy landscape.

Given the EU’s ongoing conflict with Russia over the war in Ukraine, the sanctions imposed in recent years, and its commitments to Ukraine, the alternative suppliers identified by the European Commission to replace Russian energy have proven problematic due to one route. The crisis in the Persian Gulf further complicates the situation, as even an immediate end to the conflict would leave the region highly unstable. Resolving the war through displays of strength would likely only extend the energy crisis. Commissioner Jorgensen’s recent statements echoed those of Commissioner Kadri Simson in 2022, but also incorporated rhetoric reminiscent of the pandemic era, when citizens were encouraged to work from home, reduce air travel, limit private vehicle use, and adopt renewable energy practices. The European Commission is currently adhering to the International Energy Agency’s (IEA) recommendations, which prioritise remote work to reduce oil demand, particularly diesel. The IEA also identifies jet fuel as a significant concern and thus advocates for reduced air travel to lower demand, ease energy price pressures, and curb emissions.

The IEA has recommended that remote work for at least three days per week can substantially reduce commuting‑related fuel consumption, particularly diesel. Last week, I highlighted on my social media that the energy crises of the 1970s led to a decade of stagflation, drawing on my experience as an economist analysing markets, international trade and geopolitics from my former PSC seat in Brussels. This perspective has provided me with insights into market behaviour, interconnectedness, and the influence of geopolitics. A single event can trigger widespread global economic disruption, as evidenced by the 1970s oil crisis, which caused significant economic hardship despite lower energy intensity in products and services at that time. In contrast, today’s environment is characterised by increased energy demand driven by advances in artificial intelligence, technology adoption, and rising consumerism. This makes the current crisis far more challenging to navigate.

The outlook for Europe is concerning. Historically, Europe has relied on external energy sources. The core issue is that the EU delayed investment in renewable energy for three decades. Now, the geopolitical context has shifted, and the EU has severed ties with Russia, a major supplier of liquefied natural gas and other energy products. In my view, it is imperative for the EU to invest in renewable energy or nuclear energy and pursue energy independence. Without substantial investment in renewables or nuclear energy, this issue will persist.

However, the challenge extends beyond energy security to encompass defence. The EU is currently economically ill‑equipped to address multiple crises simultaneously due to high public debt levels. Additionally, the new Multiannual Financial Framework (MFF) has adopted a different approach to defence investment. Prioritising energy security is essential before increasing defence spending. While concurrent investment in both areas is necessary, NATO and the United States remain irreplaceable in terms of defence capabilities. The United States is the primary provider of defence resources, and without its support, the EU would face significant difficulties. The bill is costly to replace the USA. This reality underscores the strategic imbalance Europe must confront.

Certainly, it is important to recognise that the President of the United States is fully aware that the EU cannot manage these challenges independently. Consequently, the EU requires stronger ties with the United States to maintain and advance its defence and security. Realistically, the EU cannot simultaneously invest heavily in defence and accelerate its transition to renewable energy. The economic situation in the EU is precarious, particularly debt to GDP ratio in major economies such as France and Italy. Surely, any significant economic instability in these countries could trigger a crisis for the euro, the currency used to purchase energy against the US dollar. A weakened euro would increase the cost of energy imports, compounding the effects of the current energy shock with a potential currency shock. This combination would be highly problematic.

Since Israel and the United States initiated attacks on Iran less than a month ago, oil and gas prices have surged by over 70%, as around one‑fifth of the world’s crude oil and liquefied natural gas supply is now obstructed in the Persian Gulf. Russia cannot serve as an alternative supplier, due to the EU’s intentional efforts to lessen reliance on Russian gas  – a milestone the EU has publicly celebrated. Reversing this policy is not feasible, particularly given the ongoing need to support Ukraine. Recent informal EU energy discussions have reportedly examined the necessity for state aid and greater investment in renewables or nuclear energy. It now appears that nuclear energy is being considered as the next step in the EU Commission’s strategy to strengthen energy security.

Malta’s political parties should consider the recommendations of the IEA and the EU Commission. Indeed, the Maltese government, along with the public sector should implement a teleworking schedule. Specifically, they should enable remote work and reinstate teleworking at pandemic levels, as I have previously advocated, to reduce CO2 emissions and ease traffic congestion. Nevertheless, policy in Malta is slow to implement, and by the time these measures are enacted, the Persian Gulf crisis may have subsided. Yet the global structural vulnerabilities will remain, and Malta cannot afford to ignore them.

The post If it is not Russian gas, it is the crisis in the Persian Gulf first appeared on The Malta Business Weekly.

The Bank of Valletta Group delivered a solid performance in 2025, generating a Profit Before Tax of €260.4 million and achieving a pre‑tax Return on Average Equity of 17.9%. This outcome reflects the strength of the Group’s underlying business model, the resilience of its core income streams, and the disciplined execution of its strategic priorities throughout the year. The Group continued to improve its balance sheet, enhance asset quality, diversify revenues and invest in its operational and digital capabilities. As a result, it enters 2026 with stronger financial foundations and clear momentum for the next phase of its strategic development.

The strong financial performance enabled the Board to propose one of the most substantial dividend distributions in recent years, with a final gross cash dividend of €65.1 million (€42.3 million net) being recommended for approval from H2 profits, equivalent to €0.1014 per share gross (€0.0659 net). Over and above, the Board also proposed a special dividend of €10.4 million gross (€6.8 million net), equivalent to €0.0162 per share gross (€0.0105 net). This special distribution reflects the portion of profitability generated during the financial year that exceeded the upper bound of the Bank’s forward‑looking PBT guidance which amounted to €250 million.

This results in a total cash dividend for FY25 (including interim payment and special dividend) of €0.2032 gross (€0.1320 net) per share, and equivalent to a total gross dividend of €130.5 million (€84.8 million net) out of the year’s profits, with the payout being fully aligned with the Group’s Shareholder Distribution Policy. The distribution underscores the Board’s commitment to delivering sustainable shareholder returns while preserving the capital strength and strategic flexibility needed to support future growth.

Complementing this cash dividend, the Bank has also allocated a €7.8 million reserve during the year to operate the regulated share buyback programme, activated during FY2025. This contributed to improved equity liquidity and more efficient capital management, showing the ever-increasing trust that markets, shareholders and the wider community have in BOV.

During the year, the Group strengthening its long‑term funding through targeted capital‑markets activity, completing the issuance of €150 million in unsecured Tier 2 bonds, concluding the €250 million EMTN programme launched in prior year. The Bank subsequently obtained regulatory approval for a new €325 million programme, under which €125 million in unsecured subordinated (Tier 2) bonds were issued, further enhancing the capital structure and supporting future growth. In parallel, the Group has commenced engagement with international markets in preparation for a €300 million Senior Preferred issuance, aimed at broadening and diversifying its wholesale funding sources while ensuring continued alignment with evolving MREL and strategic funding requirements. Further details will be issued during FY2026, with the issuance being subject to regulatory approval.

Financial Performance and Prevailing Economic Conditions

Despite normalising interest rates and sector-wide cost pressures, the Group delivered a solid financial performance, exceeding profitability targets and forward-looking expectations. While profitability declined when compared to FY2024, core operating performance remained resilient, with operating income increasing by 2.3% year-on-year, supported by disciplined balance sheet management, credit portfolio expansion, non-funded income diversification, and active cost and impairment management.

The Group further strengthened its balance sheet, with total assets increasing by €1.4 billion, with year-end figures exceeding €16.5 billion. Expansion was driven by sustained growth in customer deposits, which increased by €937 million, together with a €277 million rise in long-term liabilities following the successful issuance of Tier 2 subordinated debt, supporting strong loan book performance and expansion of the investment portfolio beyond targets.

One of the most substantial dividend distributions in years – Dr Gordon Cordina, Chairperson

Speaking during the announcement of the Group Financial Results, Chairperson Dr Gordon Cordina, said that “The Bank delivered strong profits notwithstanding the significant geopolitical tensions abroad, the normalisation of interest rates, and upward pressures on operating expenses. This highlights the resilience of our business model, the prudence of our strategic decisions, and our commitment to sustainable performance and effective risk management. The Group’s performance for 2025, which exceeded the initial profit guidance, enabled us to declare one of the most substantial dividend distributions in recent years.”

Dr Cordina continued by stating that, “As the country’s largest bank, developments within the Maltese economy directly influence our performance, just as our actions have a significant impact on households and businesses. Against this backdrop, throughout 2026, we will shape our next three-year strategy, remaining mindful of the risks, opportunities, and responsibilities we carry as Malta’s leading financial services institution.” 

Enhancing Customer Value, Accessibility, and Market Leadership – Kenneth Farrugia, CEO

CEO, Kenneth Farrugia, said that “During 2025, the BOV Group strengthened its leadership position across key customer segments, supported by targeted product innovation and improved customer experience. In retail business, home and personal lending, the Bank achieved double-digit growth. We strengthened our advisory capabilities, upgraded and modernised branches, opened a new Investment Centre in Sliema and upgraded two thirds of our ATM network. Our commercial banking performance also remained strong, with the relocation of our commercial operations to the Quad Central and a new Business Branch marking a strategic upgrade in service delivery. This reinforces our position as the Bank of Choice for both personal and commercial banking needs in Malta.”

Financial Performance

Operating income increased by 2.3% year-on-year, reflecting momentum across core business lines, optimisation of the funding and investment mix, and progress in revenue diversification. Commercial, Retail and Treasury remained the main pillars of income generation, delivering stable and recurring revenues.

Net Interest Income remained central to operating performance, increasing to €387.4 million as the Bank mitigates interest‑rate volatility through focused balance sheet optimisation and strong loan and investment activity. Net Fee and Commission Income also strengthened, rising by 8.2% to €88.1 million, driven by higher customer activity and the shift towards a more diversified, fee‑based earnings model.

Operating costs increased by 13.9% to €246.8 million over the prior year, reflecting a multi‑year investment programme aimed at strengthening technology, risk‑management and customer‑facing channels. Higher technology and cybersecurity expenditure mirrors accelerated digital implementation, transformation and resilience initiatives. Despite this, operating efficiency remains solid, with the cost‑to‑income ratio standing at 49.7% (FY2024: 44.6%).

The Non‑Performing Exposures ratio declined to 1.68%, supported by active remediation, improved portfolio monitoring and continued reduction of legacy positions. The coverage ratio increased to 59.4%, reflecting a resilient provisioning and approach to asset‑quality.

The Group’s profitability translated into a pre‑tax Return on Average Equity of 17.9%, comfortably above the 15% guidance. The year‑on‑year movement reflects both lower overall earnings when compared to the exceptional 2024 base and a higher average equity position driven by retained profits.

Profits from insurance associates increased to €10.4 million, reflecting the solid performance of the Group’s insurance operations in partnership with MAPFRE and their continued contribution to diversified earnings.

ESG remained a core priority, with progress on the Climate Transition Plan and further reductions in Scope 1 and Scope 2 emissions.

Outlook and Risk Management

The Group continues to monitor economic and geopolitical developments through risk monitoring frameworks, with assessments indicating no material emerging risks. Stress‑testing under ICAAP confirms strong capital buffers and resilience, while the Group remains vigilant towards maintaining transparent market disclosure.

The Board remains confident in the Group’s strategic direction, having delivered another year of strong performance underpinned by solid fundamentals, disciplined risk management and investment. Entering FY2026 from a position of strength, the Group remains focused on delivering sustainable growth, shareholder value and continued support for the Maltese economy.

The post BOV closes financial year 2025 with €260.4m profit before tax first appeared on The Malta Business Weekly.