Finance Minister Clyde Caruana’s Budget measures relating to Third Country Nationals (TCNs) are intended to make what was previously considered cheap labour no longer cheap. The increased fees and expenses imposed on employers are meant to encourage a change in direction, one that moves away from a model of economic growth heavily dependent on importing workers.

There is merit in this approach. For too long, businesses have been able to rely on an abundant supply of foreign labour, often at a relatively low cost, rather than investing sufficiently in productivity, technology and better working practices. A system that encourages employers to reconsider their business models is not necessarily a bad thing.

However, the challenge facing Malta is considerably more complicated than simply reducing the number of foreign workers entering the country.

If fewer TCNs are attracted to Malta, the demand for labour will not automatically disappear. Businesses will still need employees, certain sectors will continue to depend on foreign workers, and the economy will still require growth to sustain public finances and the country’s standard of living.

This is where the government needs to demonstrate that its population policy is part of a broader economic strategy rather than an isolated exercise.

The minister has been vocal in criticising businesses that, in his view, are overly focused on profits and population growth. While such criticism may be justified in certain cases, it should not obscure the fact that businesses operate within an economic environment that successive administrations have helped create.

An economy built around expansion through additional workers cannot be expected to change overnight merely because the cost of employing them has increased.

The government must therefore identify alternative ways of generating economic growth. Greater investment in automation, digitalisation, skills development and higher-value industries should become central to its ambitions. Malta needs to produce more economic value without necessarily requiring a corresponding increase in its population.

This would be a far more sustainable model, one that could improve productivity while easing pressure on housing, transport and public services.

Of course, such a transition is easier said than done. Some sectors will continue to require foreign workers, and a smaller labour supply could create difficulties for businesses that are unable to adapt quickly enough. These realities must be acknowledged rather than dismissed.

Caruana’s intervention has given population growth a more prominent place in the economic debate. That is a positive development. But controlling population growth is not an economic strategy in itself.

If Malta is to attract fewer foreign workers in the years ahead, it must also find ways of making its economy less dependent on them.

The post Editorial: Controlling population growth is only part of the equation first appeared on The Malta Business Weekly.

Progressive politics is about more than adopting ambitious policies or using the right political language. It is about making mature decisions, recognising the bigger picture and understanding when national interests can be protected without standing in the way of collective European progress.

On Monday 9 November, EU Finance Ministers discussed the proposed revision of the Tobacco Excise Directive at the ECOFIN meeting. And just as with last week’s progressive budget, Malta has another opportunity to demonstrate precisely this kind of political maturity.

The most progressive decision the government, and particularly the Minister of Finance, could take at this stage would be to abstain from the proposed agreement on minimum excise rates.

Malta’s concerns are legitimate and should not be dismissed because these raise important questions about the impact of harmonised taxation on smaller economies because measures that may appear reasonable at EU level do not necessarily have identical economic consequences for every Member State. This is why Malta must retain the right to articulate these concerns and defend its national economic interests.

A measure that may appear reasonable at EU level does not necessarily have identical economic consequences for every Member State and this is why Malta must retain the right to articulate these concerns and defend its national economic interests.

However, there is an important distinction between disagreeing with a European proposal and preventing the rest of Europe from moving forward.

The Directive seeks to modernise a taxation framework that has not kept pace with the changing tobacco and nicotine market. Addressing differences in taxation, responding to new products and ensuring that minimum excise requirements remain relevant are legitimate European policy objectives. Member States have spent considerable time negotiating compromises, and the Presidency is now seeking to bring this process to a conclusion.

Malta should not underestimate the value of reaching a European agreement, even where that agreement does not fully reflect its preferred position.

Abstention offers a sensible middle ground. Under the EU’s unanimity rules for taxation matters, a Member State can abstain without preventing the adoption of an agreement. This would allow Malta to formally maintain its reservations, communicate its concerns and protect its negotiating position, while avoiding the political consequences of being the country that blocks progress.

There is also a wider political consideration. Malta is a small Member State whose influence in European affairs depends not only on defending its interests but also on building relationships, credibility and constructive alliances. Being consistently willing to engage in compromise, where appropriate, strengthens rather than weakens that influence.

Other Member States have also expressed reservations about aspects of the proposed Directive. Sweden, for example, has raised concerns about the proposed taxation of nicotine pouches and the broader implications of the new taxation framework. The Swedish position offers an interesting example of how a Member State can maintain its reservations while exploring a constructive way forward.

For Malta, this is an opportunity to recognise that defending national interests does not necessarily require blocking European agreement. Sweden’s approach could offer useful lessons in balancing legitimate national concerns with the broader European interest in reaching a compromise.

Being progressive is about finding solutions, not simply maintaining positions. It is about balancing conviction with pragmatism, national interests with European responsibilities, and political principles with the realities of negotiation.

The Minister of Finance has an opportunity to demonstrate that Malta can be firm without being obstructive, critical without being confrontational, and progressive without having to agree with everything on the table.

Abstaining would not mean surrendering Malta’s position but recognising that sometimes the most progressive thing a country can do is to disagree, make its reservations clear and still allow Europe to move forward.

Donato Raponi is Former Head of the VAT Unit, European Commission

The post Why Malta should abstain on the EU Tobacco Excise Directive first appeared on The Malta Business Weekly.

The debate is no longer simply about creating jobs and expanding sectors. It is about where Malta wants to go as it enters the next phase of its economic development. The question is no longer whether the economy can continue to grow. That’s given. Now the question is how that growth will be generated and sustained in the years ahead.

From labour shortages to additional high-value growth

Over recent years, Malta has achieved unprecedented economic success. The country has registered strong economic growth, maintained one of the lowest unemployment rates in Europe, attracted substantial foreign and private investment, and enabled thousands to enter the labour market, including women and foreigners. Certainly, reforms such as free childcare helped increase workforce participation, particularly among women, while preserving their economic independence. However, what irks me most is that the opposition often argues economic growth was driven primarily by the arrival of foreign workers. However, such non-factual arguments ignore a simple economic reality. People migrate towards employment opportunities. Employment opportunities do not arise merely because people migrate. Indeed, Malta’s history provides a powerful reminder of this economic principle.

In the years before and after Independence, the country’s greatest challenge was the inability to create employment. I reminded parliament that reports from the colonial period reflected widespread pessimism about Malta’s economic prospects, even suggesting emigration would need to increase because the economy could not generate enough employment. Professor Lino Briguglio cites the 1964 Stolper Report, which described an atmosphere of pessimism and argued Malta’s economic absorptive capacity had reached its limits. They even suggested a decrease in income. This explains why so many Maltese emigrated at the time. I do not think they left their homeland because the archpriest recommended them to leave for a better life, amid a socio-religious crisis caused by the archbishop’s interdiction against PL supporters. Well, they left because employment opportunities were limited in Malta and prospects elsewhere were more attractive.

Today, sixty years later, Malta faces an entirely different challenge. The issue is no longer how to create jobs but how to increase growth in more productive sectors and reduce the population growth rate, though for different reasons. It means economic policy must evolve. The measures and priorities that served Malta well during the rapid economic growth that began after 2013, when the PL took office, now need to be reviewed as the country moves towards a more mature economic model.

Why we must focus on technology and high-value-added investment

Several traditional sectors of the Maltese economy have been successful. Investors took risks, committed capital and grew their businesses alongside the country’s expansion. To sustain this growth, Malta relied on additional workers across sectors including healthcare, tourism, accommodation, agriculture and construction. However, Malta today faces finite resources. The country’s territory is limited. Infrastructure, despite significant recent investment, also has capacity constraints. Major infrastructure investments since 2017 have recognised this reality. Significant resources have been allocated to roads, public services, electricity distribution, and other national projects. These investments were necessary because policymakers understood that infrastructure inherited from previous decades would not support future growth. Nevertheless, even substantial investment has limits.

Tourism has grown significantly relative to public services, and additional population growth pressures have further intensified demand on services. While these pressures have occasionally created challenges, they should be viewed within the broader context of Malta’s economic success rather than as evidence of failure. This is why the current discussion around economic policy places increasing emphasis on high value-added sectors. The key question today is not how much the economy will grow. The more important question is how it will grow.

The estimates presented by the Ministry clearly point to the need to enhance an economy driven by high-value-added activities, advanced technologies, capital investment, and innovation. The Ministry’s allocation for 2027 is approximately €163 million, with around €97 million for capital expenditure. This is significant because capital investment helps businesses modernise operations, adopt new technologies, automate processes and improve efficiency. Productivity growth happens when workers generate more value through better tools, sophisticated systems and efficient processes. Automation and digitalisation are not ends in themselves. They are tools that enable workers and enterprises to produce greater economic value.

The Budget’s economic message is clear. Malta must continue to attract investment but also transform how economic growth is generated. Future growth cannot rely only on expanding labour inputs. It must increasingly depend on higher productivity and stronger value creation.

Innovation, Human Capital and the Economy

This transition does not imply that foreign workers are no longer needed. On the contrary, they have made a significant contribution to Malta’s economic success and will continue to play a key role in the country’s future. Demographic realities cannot be ignored. Malta’s birth rate has declined, people are living longer, and the population is ageing. These trends naturally imply a continued need for foreign workers in various sectors of the economy.

At the same time, Malta’s future competitiveness will increasingly depend on sectors that compete through knowledge, innovation and specialisation rather than through labour costs alone. These include digital services, advanced manufacturing, specialised financial services, gaming, artificial intelligence and other emerging technologies. Such industries compete on talent, quality, creativity and efficiency. Strengthening these capabilities should therefore be viewed as an investment in Malta’s long-term prosperity and resilience. Yet technology alone cannot deliver this transformation.

People, not machines, ultimately create productivity. Technology provides tools that enable people to work more effectively. This distinction is crucial. Economic history shows that technological advancement does not automatically solve structural challenges. The Jevons Paradox reminds us that greater efficiency can sometimes increase overall resource consumption. For this reason, investment in technology must always be accompanied by investment in people. I have already mentioned this in the context of traffic and the Jevons Paradox.

The estimates that we discussed reflect an economic vision centred on transformation rather than simple expansion. The objective is not merely to spend more or grow faster. The objective is to build an economy characterised by higher value added, stronger innovation, greater sustainability and a higher quality of life for Maltese and Gozitan families.

That is the economic transition Malta must now embrace. We must move from an economy driven primarily by employment expansion towards one increasingly powered by efficiency, innovation and investment. Such a transition is not only necessary. It is essential if Malta is to maintain its competitiveness, resilience and prosperity in the decades ahead.

The post Malta’s economic transition continues with Budget 2027 first appeared on The Malta Business Weekly.

The Council endorsed the Ministry’s headline real GDP growth forecasts of 4.1% for 2026 and 3.8% for 2027, finding them within its acceptable range. However, beneath these encouraging figures lies a more complicated economic picture, characterised by rising public expenditure, ambitious investment targets, mounting labour costs and persistently weak productivity.

While the headline forecasts appear credible, the Council raises significant concerns about the composition and sustainability of Malta’s economic growth. In particular, it questions the extent to which the economy can continue relying on fiscal stimulus and an expanding workforce without generating corresponding improvements in productivity.

The Council considers the overall balance of risks broadly balanced for 2026 and tilted towards the upside for 2027. However, this assessment reflects opposing pressures rather than an absence of underlying weaknesses.

One major concern relates to the Government’s ambitious public investment programme. The Ministry projects total real investment to increase by 10.2% in 2026 and 7% in 2027, supported by nominal public investment growth of 40.4% in 2026, exceeding €1 billion, followed by a further 27.7% increase in 2027 to €1.35 billion.

Delivering these targets will require public investment to increase by 54% in the second half of 2026 alone. The Council considers this timetable overly optimistic, pointing to bureaucratic bottlenecks, limited contractor capacity and the historical tendency to overestimate the execution of public capital projects.

At the same time, official forecasts assume a significant slowdown in government consumption. Real government consumption growth is expected to fall from 12.8% in the first half of 2026 to 3.5% in the second half, before contracting by 0.7% in 2027.

The Council questions whether such restraint is realistic. Government intermediate consumption, covering operational expenditure, was budgeted to increase by 12.2%, or €239.8 million, in 2026. Yet Consolidated Fund data showed that €223.8 million of this increase had already materialised during the first eight months of the year.

This suggests that operational spending could exceed forecasts, potentially offsetting delays in capital investment and pushing economic growth above official projections.

The productivity challenge

Perhaps the most significant structural concern identified by the Council is the widening gap between employment growth and productivity.

Employment is projected to increase by 4.2% in 2026 and 3.9% in 2027, while unemployment is expected to remain exceptionally low at 3.3% and 3.2%, respectively.

However, real labour productivity per person employed is forecast to contract by 0.1% in each of the two years.

At the same time, compensation per employee is projected to rise by 4.9% in 2026 and 4.6% in 2027, partly reflecting tight labour market conditions and cost-of-living adjustments. Consequently, real unit labour costs are expected to increase by 2.3% and 1.9%, respectively. This contrasts with the euro area, where real unit labour costs are projected to decline by 0.1% by 2027.

The implications for businesses are considerable. Malta is increasing its workforce without generating more real output per employee. This creates pressure on operating margins, profitability and international cost competitiveness.

The distribution of national income is also changing. Employee compensation is projected to increase from 46.6% of gross value added in 2025 to 48.9% by 2027, while the share represented by gross operating surplus is expected to fall from 53.9% to 51.2%.

For an economy increasingly dependent on labour-intensive activity, this trend raises questions about the long-term viability of its growth model.

Questionable assumptions about economic capacity

The Council also challenges the Ministry’s output gap projections.

Using the EU’s commonly agreed methodology, the Ministry forecasts that Malta’s negative output gap will widen from 0.7% of potential GDP in 2025 to 1.2% in 2026 and 2% in 2027.

The Council questions whether an economy experiencing historically tight labour market conditions, job vacancy rates averaging 3.3% and expanding domestic consumption can realistically be characterised as having increasing spare capacity.

These projections are largely influenced by assumptions that continued inward migration and capital investment will expand the economy’s potential productive capacity.

However, if public investment fails to materialise as planned, the actual capital stock and potential output will be lower, narrowing the projected negative output gap.

Misinterpreting this statistical measure as evidence of genuine economic weakness could encourage unnecessary fiscal expansion when the economy may already be operating under considerable capacity constraints.

From subsidies to structural reform

The MFAC acknowledges that Government support, including fixed retail energy prices, personal income tax adjustments and increased public consumption, helped protect household purchasing power during inflationary pressures.

Indeed, government consumption accounted for approximately half of the economic growth recorded in early 2026.

Nevertheless, the Council warns that prolonged reliance on fiscal support reduces available fiscal space and creates long-term structural liabilities.

A more sustainable approach would involve moving away from universal subsidies towards targeted assistance for lower-income households. Energy and fuel pricing policies should also encourage efficiency rather than remove incentives to reduce consumption.

A progressive tariff structure could ensure that excessive domestic and commercial energy consumption is charged closer to market rates, while protecting vulnerable households. This would also encourage businesses to invest in energy efficiency and private microgeneration.

Government must also address the continued expansion of operational expenditure. Strict spending ceilings on procurement, services and administrative supplies would help contain costs. Public sector recruitment should be reviewed to ensure that scarce labour resources are not absorbed into non-essential administrative roles at the expense of private-sector activity.

Fiscal incentives should similarly move away from untargeted consumer stimulus and towards investment that generates measurable productivity improvements.

Accelerated capital allowances for digital adoption, tax incentives for businesses achieving productivity gains and restructuring support for family businesses facing succession or operational challenges could help strengthen enterprise competitiveness.

Making public investment count

Another important finding concerns the effectiveness of public investment.

Despite substantial headline spending, real public infrastructure investment per capita increased by an average of just 0.3% annually between 2019 and 2025. Physical infrastructure has therefore struggled to keep pace with population growth, contributing to pressure on electricity distribution, transport networks and urban systems.

The challenge is not simply to spend more, but to ensure that investment is properly prioritised, implemented and delivers measurable economic returns.

Rather than launching numerous fragmented construction projects that exceed available contractor and engineering capacity, public investment should concentrate on critical infrastructure bottlenecks. Electricity distribution networks, the second electricity interconnector and other strategic projects should take precedence over less essential enhancements.

Procurement procedures should also be strengthened, with greater accountability for delays and appropriate consequences for contractors who repeatedly fail to deliver.

A transition towards higher-value activity

For private businesses, the existing model of relying on continuously increasing foreign labour to sustain expansion is reaching operational and infrastructural limits.

Government support through Malta Enterprise and other funding schemes should increasingly favour businesses investing in automation, artificial intelligence, advanced robotics and enterprise resource planning systems rather than models dependent on large numbers of relatively low-skilled employees.

However, investment in technology must be accompanied by investment in people. Vocational education and industry-led training programmes need to equip workers with the digital, technical and management skills required to operate increasingly sophisticated systems.

Upskilling the existing workforce would allow businesses to generate greater domestic value added per hour worked, improving competitiveness without relying exclusively on further population growth.

Importantly, reducing dependence on labour-volume expansion should not translate into blunt restrictions that disrupt essential services. Policy must distinguish between consumption-driven business models and indispensable sectors, particularly health-related services, that depend on third-country nationals.

Employers should also be encouraged to retain and develop their foreign workforce through training and improved career opportunities, reducing costly employee turnover and building institutional knowledge.

Ultimately, Malta needs a coordinated transition towards a more capital-intensive and knowledge-based economy. Such a shift would also help ease pressure on transport, healthcare, education, water and waste management systems, as well as the natural environment.

The MFAC’s assessment delivers an important warning: headline GDP growth of around 4% should not obscure the structural weaknesses developing beneath the surface.

Continued fiscal expansion and the constant addition of workers cannot remain the principal drivers of economic growth indefinitely. A sustainable model must instead prioritise productivity, infrastructure, skills development and higher-value enterprise.

The transition will require carefully calibrated fiscal incentives and coordinated reforms across education, infrastructure and planning. The very difficult balance will be to  maintain the needed  pace of economic expansion whilst undergoing this economic transformation using finely calibrated disincentives rather than blunt administrative shocks to prevent severe operational disruptions,whilst still  ensuring that future growth delivers greater value, stronger competitiveness and improved long-term sustainability.

The post Beyond the topline first appeared on The Malta Business Weekly.

Barbados has historically been an important domicile for Canadian-owned captives. The Barbados International Business Association reported that Canadian-owned captives accounted for 43% of its captive market in 2025, down from 51% in 2021. Historically, qualifying profits from non-Canadian insurance business could benefit from Canada’s foreign-affiliate rules and be distributed to a Canadian parent as “exempt surplus”. The Canada–Barbados double-taxation treaty, signed in 1980, formed part of the wider framework. However, this was never an automatic route to tax-free profits. A 2011 protocol, effective from December 2013, excluded entities benefiting from specified Barbados tax regimes, including certain insurance regimes, from many treaty benefits.

Those rules are central to the latest development. Under Canada’s foreign accrual property income (FAPI) regime, certain income earned by a controlled foreign affiliate is included in its Canadian parent’s taxable income, even if profits remain offshore. Existing provisions already treat income from insuring or reinsuring specified Canadian risks as FAPI. These generally concern risks linked to a Canadian resident, property in Canada or a business carried on in Canada.

In July 2026, Canada’s Department of Finance published draft legislation proposing to clarify how the rules apply when a foreign affiliate holds investments backing Canadian insurance liabilities, even though another company in the group actually underwrites the policies. The aim is to prevent investment income from falling outside the rules simply because the assets and insurance contracts sit in separate entities. The proposal is not a blanket ban on offshore captives, nor does it target assets backing genuine non-Canadian risks. While it remains draft legislation, the proposed effective date is for foreign-affiliate tax years beginning after 4 November 2025, if enacted.

For Canadian companies primarily seeking to insure domestic risks, moving a captive from Barbados to another foreign jurisdiction would not, by itself, remove Canadian tax exposure. An alternative could instead be to bring the insurance structure back onshore. Alberta has developed its own captive framework, and industry commentary published in October points to companies moving Canadian risks back there, citing regulatory flexibility and potential premiums  tax  of 3% on life ,general insurance whereas 4 % on property, casualty etc and an 8% general corporate tax.

For businesses with substantial international operations, however, the considerations may be different. Rather than simply bringing their insurance activities back to Canada, multinational groups may be looking for a regulated base from which to manage risks across several markets. This is where Malta could enter the picture. The Malta Financial Services Authority (MFSA) authorises and supervises insurance and reinsurance undertakings, including captives, under a framework aligned with EU insurance rules. An authorised Maltese insurer can, subject to regulatory requirements, use the EU’s passporting system to operate across the European Economic Area. Malta also offers protected cell company structures, which segregate the assets and liabilities of different insurance programmes within one corporate structure. Its legislation further provides for captives and, subject to conditions, the continuation in Malta of an insurer established elsewhere.

These features may interest Canadian-owned groups with subsidiaries, employees, property or supply chains across Europe. A Maltese captive could provide a regulated base for pooling and managing those non-Canadian exposures, rather than serving as a device to move Canadian insurance income offshore. Any structure would still need to meet Canadian tax rules, EU prudential requirements and the commercial substance expected of a genuine insurer.

The potential opportunity also coincides with a broader shift in EU–Canada relations. At their 30 October 2026 summit in Montréal, leaders launched the Canada–EU Alliance for the Future, identifying financial services and markets as a priority for closer cooperation and aiming to increase cross-border capital flows and access to financial services. They also agreed to define by the 2027 summit the concept of a closer association, short of EU membership.

 In the past PKF Malta was active in promoting captives in Toronto to set up locally and with the approval of MFSA we shall book another promotional visit for 2027.For the Island, this emerging relationship may present an opportunity. Canada’s tax proposals may prompt multinational groups to review how they organise insurance risks and supporting assets, while closer EU–Canada ties could reinforce their interest in European markets. In anticipation of FDI , may be in offering internationally active Canadian businesses a well-regulated European platform from which to insure and manage their European and other foreign exposures.

Dr Lina Klesper is an International Legal Assistant at PKF Malta

The post Join us to promote Toronto insurance business to migrate to local captives first appeared on The Malta Business Weekly.

The Malta Business Bureau led a 19-strong business delegation to Brussels to engage with institutions, policymakers and decision-takers, discuss ETS, competitiveness, the Blue Economy and the newly published Sustainable Tourism Strategy, and advocate for Maltese business interests.

Speaking during one of two policy roundtables for which Commission and EP officials were present, MBB CEO Mario Xuereb spoke about striking the right-balance between connectivity, competitiveness and the challenges brought about by climate change.

“Around 70 per cent of Malta’s imports arrive on the Italy to Malta line so the maritime EU ETS reaches Maltese businesses and households through freight rates MBB supports the ETS and its 2030 and 2040 objectives. Our concern is proportionality: on a route with no alternative mode, a full carbon charge cannot change behaviour, it can only raise prices.”

Policy Advisor Nigel Caruana listed MBB’s recommendations on ETS which include

• a 50 per cent ETS derogation with no end date for ro-ro cargo ships, ro-pax ships and container ships travelling between a port in a Member State and a port on an island in a Member State with a surface area of less than 10,000 km² and no road or rail link to the mainland;
• charging only the cargo actually carried on the empty return leg;
• keeping the transhipment safeguards at a 50 per cent threshold and the 150 nautical mile rule to protect the Malta Freeport against nearby North African hubs;
• providing free allowances covering 50 per cent of the ETS surrender obligations for eligible flights to and from islands below 10,000 km² with no fixed road or rail link;
• and strengthening support for sustainable aviation fuel.

MBB Vice President Sergio Vella said that lessons learnt by Maltese industry in lobbying and advocacy efforts have fuelled and driven the organisation’s efforts to reach out as early as possible to influence policy proposals. He said MBB keeps monitoring and pushing for resolution of issues in favour of Maltese business and industry at various stages and different levels of the policy-making process.

On the Blue Economy, MBB Policy Executive Juliette Mizzi also presented recommendations which include the appointment of an EU Blue Economy Envoy, further cooperation on youth and skills development through Global Gateway; the mobilisation of investment and EU funding in EU port electrification, sustainable maritime fuels and water and energy resilience amongst others.

The delegation held meetings with BusinessEurope and HOTREC at their offices, informal meetings with Eurochambres and also had the opportunity to exchange views in separate meetings with EP President Roberta Metsola; Commissioner Glenn Micallef; and PREU Neil Kerr, who was joined by Deputy Permanent Representative Chris Farrugia.

They also engaged in a Q&A session with Maltese MEPs Alex Agius Saliba, Peter Agius, Daniel Attard and Thomas Bajada. Over the past months MBB engaged MEPs propose amendments to the ETS reform proposal put forward by the European Commission earlier this year. Xuereb thanked them for keeping an open channel of communication throughout and encouraged them to keep pushing the positions discussed with MBB for the benefit of Maltese business and industry.

Attard Holdings, Express Trailers, Concorde IFF, EuroBridge, ATTO, AP Valletta, Deloitte, KPMG, EY Malta, FinPlus Europe, the Institute for Tourism Studies, KM Malta Airlines, Brands International and Harbour Solutions joined the delegation. 

The MBB is the only Maltese organisation based in Brussels. It has been advising the Malta Chamber of Commerce and MHRA on EU policy for the past three decades.

The delegation was supported by Malta’s Permanent Representation to the EU, KM Malta Airlines, VisitMalta and Transport Malta.

The post Striking the right balance on ETS and competitiveness first appeared on The Malta Business Weekly.

This strong traffic performance was registered on the back of an increase of 6.6 per cent in aircraft movements, as the Maltese Islands benefitted from connections to more than 110 destinations throughout the season.

In parallel, seat capacity increased by 9.1 per cent, with seat occupancy remaining high at 84.7 per cent.

With a market share of 21 per cent, the United Kingdom topped October’s market leaderboard, followed by Italy and Poland. The three top markets registered varying degrees of growth, ranging between 3.7 per cent (Italy) and 34.6 per cent (Poland).

Ranking fourth and fifth respectively, Germany and France both registered a decline in passenger movements. While Germany’s drop was negligible at 0.2 per cent, France registered a more significant drop of 12.3 per cent following the discontinuation of two routes by two airlines.

Malta’s market outlook for winter remains relatively positive, with passenger traffic expected to remain largely unchanged from that registered during the previous winter. At the same time, the broader aviation environment is set to be influenced by high fuel prices and operational costs, impacting airline profitability and planning.

The post MIA registers 85% seat occupancy in October first appeared on The Malta Business Weekly.

A Central Bank of Malta analytical study by economist Eliza Farrugia examines developments in the accommodation and food services sector, covering business formation, economic performance, employment, productivity, profitability and its links with other sectors of the Maltese economy.

The number of active business units in the sector stood at 4,297 in 2024, accounting for 7.1% of all registered business units in Malta. The sector has undergone a notable transformation over the past decade, with accommodation activities accounting for an increasingly larger share of businesses.

Between 2015 and 2024, the sector added 1,911 business units. Of these, 1,401 were in accommodation, while food and beverage services accounted for the remaining 510. The share of accommodation businesses increased from 9% in 2015 to 38% in 2024, while the share of food and beverage businesses declined from 91% to 62%.

The expansion of accommodation activities was accompanied by an increase in hotel bed-stock, which grew by an average of 1.6% annually during the period. The study also notes that the number of accommodation-related business units increased particularly in the years following the COVID-19 pandemic.

The sector remains dominated by small businesses. Micro enterprises, employing between zero and nine people, accounted for 93.4% of firms in 2023, while small enterprises represented 5.6%. Medium-sized and large businesses together accounted for less than 1%.

The growth in businesses has largely been driven by sole ownerships and partnerships, particularly within accommodation. This suggests that the sector’s expansion has been led primarily by smaller operators rather than larger companies.

Changes have also been observed in the type of accommodation used by inbound tourists. Collective accommodation, which includes hotels and similar establishments, accounted for around 75% of tourist nights in 2013, but its share declined to approximately 61% in 2025. Meanwhile, the share of other rented accommodation increased from 14% to 31%, reflecting the growing importance of alternative accommodation options.

The sector’s economic contribution has increased considerably over the longer term. In 2000, accommodation and food services accounted for approximately 4% of Malta’s total GVA. By 2025, this share had risen to around 6.3%, with accommodation activities contributing 62.6% of the sector’s GVA and food and beverage services accounting for 37.4%.

Economic growth was relatively modest between 2000 and 2009, averaging 1.1% annually. It accelerated significantly during the following decade, with average growth of 9.7% between 2010 and 2019. The pandemic interrupted this expansion, but the sector recovered strongly, with real GVA growth reaching 25.9% in 2023, 20.2% in 2024 and 15.3% in 2025.

The Central Bank notes that the sector’s performance broadly follows trends in inbound tourist arrivals and nights spent. The recovery and subsequent expansion were supported by rising tourism activity and improvements in air connectivity. Policies allowing greater hotel heights also played a role in supporting the expansion of accommodation capacity.

Employment has grown alongside the sector’s economic performance. The number of workers employed in accommodation and food services reached 32,473 in 2025, accounting for around 8% of total employment in Malta. Employment grew by an average of 6.9% annually between 2013 and 2025.

Of the total workforce in 2025, 23,871 were in full-time employment and 8,602 in part-time employment. Food and beverage services continued to account for the larger share of employment, although accommodation activities recorded substantial increases in recent years.

One of the most significant developments highlighted by the study is the sector’s growing dependence on foreign workers. Their number rose from 3,013 in 2013 to 18,673 in 2025. Foreign workers consequently accounted for 58% of total employment in the sector, compared with 35% across the overall Maltese economy.

The increase has been driven largely by non-EU nationals. While EU workers outnumbered non-EU workers between 2013 and 2019, the latter began increasing at a faster pace from 2020 onwards, particularly from 2022. The study cautions that part of the change in that year was attributable to the reclassification of UK nationals as non-EU citizens following Brexit.

The reliance on foreign labour is particularly notable given the transient nature of the workforce. Foreign workers in Malta have a median length of stay of around three years, while those employed in accommodation and food services remain for a median period of just 2.3 years. This creates an ongoing need for recruitment and replacement, potentially affecting continuity and the development of skills within businesses.

The sector’s labour conditions also stand out when compared with the euro area. In 2024, the average hourly wage in Malta’s accommodation and food services sector stood at €8.90, considerably below the euro area average of €16.70. Compensation per employee in the sector amounted to approximately €17,200 in 2025, compared with €36,000 across the Maltese economy.

Although compensation per employee increased by an average of 5.2% annually between 2013 and 2025, the sector continues to be characterised by relatively low wages. This is particularly relevant given its substantial contribution to employment and the economy.

Productivity remains another challenge. The study places accommodation and food services among the sectors with the lowest productivity levels in Malta, with only construction recording lower productivity. While the sector has expanded considerably in terms of output and employment, its productivity performance has not kept pace with its growth.

Profitability presents a more mixed picture. The sector ranked fourth among Maltese economic sectors in terms of profitability per unit of GVA in 2025. However, developments differed between its two main activities: profitability increased in accommodation, while food and beverage services recorded a decline.

The study also examines the sector’s links with the wider domestic economy. Input-output data for 2020 show that accommodation and food services generated output worth €714.9 million and used €473.6 million in intermediate inputs. Around €320 million, or 68% of these inputs, were sourced domestically, while €146 million consisted of imported products.

The sector relies particularly on distribution, manufacturing and real estate for its domestic inputs. This highlights the extent to which activity in accommodation and food services supports other areas of the economy, including suppliers and businesses providing goods and services to tourism operators.

The Central Bank’s analysis further indicates that the sector has relatively strong output and employment multipliers compared with other economic sectors, although its accounting multipliers are lower. Its economic importance therefore extends beyond its direct contribution to GVA and employment.

Tourism-related exports remain a major source of revenue. Travel receipts reached €2.89 billion in 2025, while net travel receipts accounted for 26.5% of Malta’s services balance.

The findings underline the considerable expansion of accommodation and food services and its growing importance within Malta’s economy. Yet the sector’s performance remains closely tied to tourism activity, while its reliance on foreign workers, relatively low wages and weak productivity point to challenges that could become increasingly significant.

Sustaining growth will therefore require not only continued tourism activity, but also attention to the sector’s labour conditions, productivity and ability to generate stronger economic value from its expanding workforce and business base.

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In October 2026, the number of final deeds of sale relating to residential property amounted to 1,217, a decrease of 5.6% when compared to those registered in October 2025. The value of these deeds totalled €415.4 million, representing an increase of 12.1% when compared to the corresponding value recorded in October 2025.

The residential property transactions featured in this release are not limited to purchases by individuals (households) but may also involve other economic agents. In addition, a single final deed of sale or promise of sale agreement may include more than one property.

In the month under review, 1,081 (88.8%) of these final deeds of sale involved individual buyers (households), with companies accounting for virtually all remaining deeds. The value of the deeds involving individual buyers (households) amounted to €307.2 million, equivalent to 74.0% of the total value.

Final deeds of sale by locality

The highest numbers of final deeds of sale were recorded in the following localities: San Pawl Il-Baħar (83), Birkirkara (63) and Il-Mosta (47).  

Properties transacted in the final deeds of sale

During the month under review, the number of properties transacted in the final deeds of sale was equivalent to 1,337. Apartments (477) and garages (305) accounted for the largest shares, at 35.7% and 22.8%, respectively.

Promise of sale agreements

In October 2026, 1,408 promise of sale agreements relating to residential property were registered, equivalent to an increase of 4.1% over the same period in 2025. The value of these agreements totalled €522.0 million, representing an increase of 4.9% when compared to the corresponding value recorded in October 2025. Individual potential buyers (households) accounted for 1,262 (89.6%) of these agreements, while the rest mainly involved companies.

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Malta’s trade deficit narrowed significantly in the first eight months of 2026, as exports increased and imports declined, according to provisional figures published by the National Statistics Office (NSO).

The deficit in trade in goods reached €2.84 billion between January and August, down by €624.1 million from the corresponding period last year.

During this period, imports totalled €6.32 billion, a decrease of €152.2 million compared with the first eight months of 2025. Exports, meanwhile, rose by €471.9 million to €3.48 billion.

The figures point to an improvement in Malta’s trade balance, supported by stronger export performance and lower imports across several major commodity groups.

Exports surge in August

In August alone, Malta recorded a provisional trade deficit of €295.7 million, compared with €371.8 million in the same month last year.

Exports increased by €76.9 million year on year to €481.4 million, representing growth of 19%. Imports edged up by just €0.8 million to €777.1 million, an increase of 0.1%.

The stronger export performance was largely driven by mineral fuels, lubricants and related materials, which recorded an increase of €65.1 million. Machinery and transport equipment also contributed, with exports in this category rising by €26.7 million.

These gains were partly offset by a €30.6 million decline in chemical exports.

On the import side, higher purchases of mineral fuels, lubricants and related materials contributed an additional €91.1 million. However, this was partly counterbalanced by decreases in imports of machinery and transport equipment, chemicals and food, which fell by €50.1 million, €36.1 million and €12.7 million respectively.

The August figures suggest that stronger exports, rather than a significant reduction in imports, were the main factor behind the narrower monthly trade deficit.

Machinery and fuels shape trade performance

Developments in machinery, transport equipment and energy-related products played an important role in Malta’s trade performance during the first eight months of the year.

Imports of machinery and transport equipment fell by €390.6 million compared with the same period in 2025. Lower imports of chemicals, down by €56.4 million, and miscellaneous transactions and commodities, down by €29.6 million, also contributed to the overall reduction in imports.

These declines were partly offset by a €291.4 million increase in imports of mineral fuels, lubricants and related materials, alongside a €34.4 million rise in miscellaneous manufactured articles.

On the export side, machinery and transport equipment generated an additional €200 million compared with the first eight months of last year.

Exports of mineral fuels, lubricants and related materials increased by €194.2 million, while miscellaneous manufactured articles recorded a rise of €47.7 million.

The contrasting movements across these categories underline the importance of the composition of Malta’s imports and exports in determining the overall trade balance.

European Union remains Malta’s main trading partner

The European Union continued to account for the largest share of Malta’s merchandise trade during January-August 2026.

Imports from EU member states amounted to €3.76 billion, equivalent to 59.5% of Malta’s total imports. Exports to the bloc reached €1.13 billion, accounting for 32.6% of total exports.

Asia was the second-largest regional trading partner, representing 20.7% of imports and 12.7% of exports.

At country level, Belgium recorded the largest increase in imports, at €102.7 million. France registered the largest decrease, with imports falling by €512.9 million compared with the corresponding period last year.

Germany was the destination recording the largest increase in exports, with a rise of €55.4 million. Exports to Turkey, meanwhile, registered the largest decline, falling by €44.9 million.

These figures highlight the continued importance of European markets to Malta’s external trade, while also illustrating how shifts in individual trading partners can influence the country’s overall trade flows.

Underlying trade deficit also improves

A separate measure published by the NSO excludes mineral fuels, oils and related products, aircraft and spacecraft, and ships and other floating structures.

Under this measure, Malta’s trade deficit stood at €175.2 million in August, down from €211.3 million a year earlier.

Imports within this category totalled €439.6 million, a decrease of 4.3% year on year, while exports rose by 6.5% to €264.4 million.

For January-August, the deficit under this measure narrowed by €340.3 million to €1.72 billion. Imports declined by 2.7% to €3.81 billion, while exports increased by 12.7% to €2.09 billion.

The figures indicate that the improvement in Malta’s trade balance was not limited to the overall headline measure, although the composition of trade remains an important consideration when assessing the underlying trend.

A stronger trade balance

Malta’s goods trade deficit remains substantial, reflecting the fact that the value of imported merchandise continues to exceed that of exports. Nevertheless, the latest figures show a marked improvement compared with 2025.

The €624.1 million reduction in the deficit during the first eight months of the year reflects both a decline in imports and an increase in exports, with machinery and transport equipment and mineral fuels playing a significant role in export growth.

The figures are provisional and may be revised as additional trade data become available.

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