The Q3 GDP figures are out. This makes an interesting read when one delves deeper beneath the surface. In volume terms, Malta’s GDP in Q3 2024 grew by 4.9% when compared to Q3 2023. However, it is interesting to see where this growth is mainly coming from.
If one where to analyse the top three sectors, which registered the highest Gross Value Added (GVA) growth in the period Q1 to Q3 2024, when compared to Q1 to Q3 2023, these are :-
- Professional, scientific and technical activities; Administrative and support service activities
- Wholesale and retail trade; repair of motor vehicles and motorcycles; Transportation and storage; Accommodation and food service activities
- Public administration and defence; compulsory social security; Education; Human health and social work activities
The professional sector covers various areas including Architectural and engineering activities, Scientific research and development; Advertising and market research; Veterinary activities; Rental and leasing activities (not property), Employment activities including temping agencies, travel agency and tour operator, Security activities, Cleaning activities and Office Admin & Support. So, it is likely that a mixture of high value added jobs and low value added jobs are part of this sector.
The second sector is made up of Wholesale and retail trade, Transporting and storage, Sea and land and air transport and accommodation and food service activities. This is a sector which largely covers local wholesale and retail trade and various other activities directly linked to tourism. With tourist arrival numbers ballooning as they are doing, it is no surprise that this sector is a leading economic growth sector in Malta.
The Professional and Wholesale & Trade sectors (the first two sectors above) cover 29% of the GVA increase between Q1-Q3 2024 to Q1-Q3 2023. This rises to 41% of the increase in GVA for the same period mentioned above, if we include the third sector covering Public Administration.
All this brings me to the final point. It is obvious that the above sectors, especially the first and second sector listed above, rely on a number of jobs performed by third country nationals. These are sectors which are presently contributing mostly to economic growth.
Now, as I have emphasised many times before, we need to aim at achieving higher productivity to grow our economy, rather than relying on an indefinite annual influx of around 20,000 people to Malta. Agreed.
As always the devil is in the detail. We do have a history of going from one extreme to another in a short period of time, with the obvious consequences.
However, here we need to thread carefully. I am referring explicitly to the upcoming economic migration policy. Such policy, while I fully agree that it is needed, needs to be crafted in a way that does not give big shocks to our economy. An economy is ultimately like a big oil tanker and bringing changes to something as fundamental, like the labour market, needs a long transitionary period, which is assisted hugely by the right mix of incentives to support massive investments needed in digitalisation. Such investments require time to materialise. We need to be sure that such policy is based on a well-crafted plan of how we need to get from point A to Point B, in a realistic timeframe.
With our annual public deficit running in very high numbers, if our economic growth falters, we risk creating more problems than the ones we are trying to solve, as we need economic growth to make sure that our growing public debt is to remain on a sustainable footing.