All data points outline that Malta’s economy, that remains remarkably resilient, stands at a critical juncture. While the headline figures suggest stability, the underlying dynamics signal that the era of “quantity-driven” growth is nearing its limits. For Maltese businesses, the message is clear. The most successful businesses going forward will be those that will have their strategies built on enhancing productivity through an aggressive digital transformation.
Malta’s economic performance continues to outpace the Euro Area (EA), with a projected Real GDP growth of 3.7% for 2026, compared to just 1.2% for the EA. At a 2.8% unemployment rate Malta maintains a significantly tighter labour market than the EA average of 6.2%. While this supports consumer spending, it presents a “talent war” for firms. Economic growth in Malta is currently undergoing a process of normalisation, as real GDP growth rates transition from the exceptionally high post-pandemic levels to a more stable, medium-term trajectory. The transition is characterised by a gradual moderation in growth, moving towards the economy’s potential output by the end of the current forecast horizon.
Real GDP reached a high of 6.8% in 2024 (following even higher rates in previous years, such as 10.6% in 2023). Economic growth is estimated to moderate to approximately 3.7%-4% by end 2025 and is forecast to remain stable around 3.7%-3.8% in 2026, eventually settling toward 3.5% in 2027 and 3.2% by 2028. Several domestic and international factors are contributing to the cooling of economic activity. After a period of robust spending, private consumption is easing toward a more typical growth rate. Projected growth for private consumption is set to moderate from recent highs to approximately 3.1%-3.5% by 2027. Growth momentum is also being weighed down by physical capacity bottlenecks and a structurally tight labour market. Acute skills’ mismatches and tighter immigration rules are expected to slow employment growth from 5.3% in 2024 to roughly 2.3%-2.9% over the coming years. Following a massive post-pandemic rebound, tourism is reaching a more mature growth phase.
Malta’s economic growth has been fuelled by two major factors. An increase in population density and an increase in the employment rate. This means that economic growth has historically relied more on increasing the quantity of labour and population rather than substantial leaps in productivity, with Malta’s productivity growth lagging behind the EU average. Now, as the economy reaches its physical capacity limits, this “quantity-driven” era is shifting toward a normalisation phase focused on more sustainable, potential output. To put things into perspective with regards the tight labour market, as outlined below, Malta’s population by end 2024 had more foreign nationals residing in Malta than Maltese nationals between the ages of 26 to 36.
On the other hand the latest economic update, issued by the Central Bank of Malta, outlines that overall consumer and business sentiment is on a high, but then the bank’s Economic Policy Uncertainty (EPU) Index has moved further above its historical average, driven largely by domestic concerns. This suggests that while businesses feel confident today, they are wary of the policy and environmental shifts required for tomorrow.
The data is unequivocal. The post-pandemic “sugar rush” has faded, leaving behind an economy that can no longer rely on the sheer volume of arrivals or the continuous expansion of the labour force to drive prosperity. Malta’s transition to a normalised growth rate of 3.2%-3.7% is not a sign of failure, but a mandatory evolution toward its potential output.
For the Maltese business community, this “new normal” represents a high-stakes race against structural constraints. With unemployment at a historic low of 2.8% and a labour market so tight that foreign nationals now outnumber locals in key productive age brackets, the traditional recruitment-led growth model has hit a wall. Productivity is no longer a buzzword; it is the only viable survival mechanism. Businesses that fail to pivot by investing in a digital transformation, will find themselves trapped between rising operating costs and a slower topline growth trajectory that leads to eroded competitiveness. Conversely, the winners will be those businesses who will treat digital transformation not as a software upgrade, but as a fundamental re-engineering of their value proposition and operational processes. In an economy at a critical juncture, the greatest risk is standing still.
