Middle East burns yet Malta’s prospects are bright

Robert Abela said people are buying more cars and boats and going on more holidays thanks to a Labour government that made luxuries accessible to many. He admitted, however, that the new indulgences have come with a price that people must accept.

There’s a popular narrative that the country doesn’t need the real estate sector. It’s not the engine of the economy, but it’s one of its lubricants. We hold our breath and recall salient electoral pledges sung by Labour influencers in the lead-up to the party’s unprecedented fourth consecutive victory. Among the many pledges made were:

• The €1,000 annual “super bonus” for workers (minimum €500 for part-timers); next, more family/parental support, such as extending maternity leave to 26 weeks; introducing six months of government-paid parental leave (shared); additional paid leave for new parents; and a €5,000 birth bonus per child.
• More exciting freebies include extended housing help – the “My First Home” scheme: an interest-free government loan of up to 25% of the property value for first-time buyers. Added to these incentives were a range of youth-focused measures, including a commitment to exempt the first €30,000 of income from tax for three years for young people entering the workforce or starting a business. An even bigger incentive was reserved for pensioners, who were promised a €50 weekly increase over five years, on top of COLA adjustments.
• The Chamber of Commerce applauded promises for their members, such as €250 million for economic shocks; a target of 4% annual GDP growth; keeping the deficit under 3%; and more high-quality jobs. Nothing pleases the sans-culottes more than the promise to freeze construction during appeals; revise local plans; build two Gozo Channel boats; and protect green spaces (for example, Manoel Island and White Rocks as national parks).

Some pledges are expensive or complex (for example, major infrastructure, large pension increases, extensive school modernisations) and may face delivery challenges. The government is likely to prioritise the most visible ones (bonuses, family benefits, first-time buyer help) early on, but full delivery on the broader manifesto will depend on economic conditions and execution – areas where previous Labour governments have shown both strengths and delays.

The Central Bank has taken a bullish stance towards Malta’s economy, revising its GDP growth forecasts upwards and saying overall risks to economic growth in 2026 are tilted to the upside. It expects Malta’s economic growth to be largely fuelled by an increase in domestic demand and a gradual recovery in private investment. Net exports will also contribute to growth, though less than domestic demand.

Inflation risks are also slightly tilted to the upside, the Central Bank said: geopolitical and global trade issues could all create supply-side bottlenecks that fuel inflation; wage pressures could be stronger than expected; and unfavourable weather conditions, as well as some policies supporting the green transition, could also push up inflation.

Growth is projected at 3.7% in 2026, 3.6% in 2027, and around 3.8% in 2028 (Central Bank). The IMF expects Malta to lead Europe with ~4% average annual growth through 2031. All the while, there is a healthy prognosis that we did exceed EU economic targets, with GDP growth reaching 4.9% at constant prices in 2024.

One congratulates Clyde Caruana, Finance Minister, as a dignified economist announcing a generous budget for 2026 which, inter alia, aims to help a low-income stratum of society, nurture young families, and lift up pensioners’ lot in fighting the cost of living. In his budget speech, he stressed that Malta’s economy aims for its next leap forward in terms of quality, to start producing more clean energy by harnessing natural resources like wind and solar power.

Many sustain a common perception that commercial banks are brimming with idle cash yet, as a general rule, give a hard time when approached to lend depositors’ money. This is true, however, as a result of Malta’s FATF grey-listing in 2021; banks had taken a cautionary approach and decreased their risk appetite, particularly in areas where they lacked sufficient knowledge of proposed business lines or activities. Malta’s swift removal from the Grey List in 2022 has since leveraged expectations that banks return to their previous stance and become more approachable.

Moving on, one notes with satisfaction a projected compilation by foreign experts of a Malta Vision 2050. Naturally, no discussion is complete without mentioning the exemplary tourism revival since the two ugly years of the pandemic.

On a sore note, we cannot omit to mention a drawback in our educational system, with only one in five students passing Matsec exams. Realistically, given the millions invested in education, the dismal maintenance of a low scholastic level each year carries deep economic and social implications for Malta’s both present and future AI digital industry.

In summary, many hope that 2026 will augur well for our leaders to stand tall, forget the political divide, and try to boost exports by lifting their heads above the parapet.