Economy Minister Silvio Schembri has defended the government’s economic trajectory, dismissing the common criticism that Malta’s growth is built solely on the importation of foreign labour.
In an interview with this media house, he characterised this argument as misleading, asserting that an economic model is a dynamic framework designed to incentivise growth and build national resilience rather than a static set of activities. According to the Minister, the strategy has evolved through distinct phases dictated by the immediate needs of the country, moving from a focus on basic employment to a sophisticated emphasis on high-value industries.
Reflecting on the state of the nation in 2013, Schembri noted that the Labour government inherited a stagnant economy marked by high unemployment and an excessive deficit procedure. At that time, the priority was the restoration of economic fundamentals. He argued that when families are struggling with unemployment, the immediate requirement is job creation rather than a discussion on the quality of those jobs.
The first five years of the Labour administration were therefore dedicated to jumpstarting activity and stabilising national finances. He suggested that while previous administrations may have had aspirations for the country, they lacked the capacity to actually generate the wealth necessary to fund those ambitions.
The transition to a more refined model was interrupted by the global pandemic, which shifted the government’s focus toward preservation. Schembri explained that the primary goal during those two years was to protect existing businesses and employment so that the country would be in a position to restart once the crisis subsided. He contrasted Malta’s performance with that of larger, resource-rich nations that struggled significantly more during the same period. By 2023, the government felt the foundations were strong enough to initiate the next phase of the strategy, which prioritises value-added activity over simple job volume.
This shift is evidenced by recent investments in specialized sectors such as aviation, semiconductors, medical technology, pharmaceuticals, and the digital economy, including blockchain and video game development. Schembri pointed out that the spike in GDP growth from 2023 onwards is a direct result of this focus on higher value.
He addressed political criticism by stating that new economic niches do not mature overnight, often requiring three to five years to show results. He cited the gaming industry as an example of a sector that took years to reach maturity under both parties, suggesting that the current government is now seeing the fruits of frameworks established in 2018 and 2019.
Regarding the challenges of rapid expansion, the Minister admitted that the pace of growth triggered a housing rush that lacked sufficient coordination. He acknowledged the resulting issues with uglification and urban standards, conceding that the government could have managed planning more effectively. He noted that long-term coordination and improved standards are now central pillars of the Vision 2050 document, which aims to provide a more structured roadmap for the country’s future development. He also teased an upcoming announcement regarding what he described as the largest new foreign direct investment in Malta’s history, surpassing previous significant expansions in the manufacturing sector.
The interview also touched upon the impact of international instability, specifically the ongoing conflicts in the Middle East. Schembri observed that as a small and open economy that imports 70 per cent of its consumed products, Malta is highly sensitive to shifts in global logistics and supply chains. While acknowledging the volatility of the geopolitical situation, he sought to reassure the public that the government is monitoring developments closely. He noted that the experience gained during the pandemic and the Russia-Ukraine war has provided the administration with the expertise needed to manage such crises. Currently, he does not anticipate significant disruptions to the supply chain from the situation in Iran, noting that the Freeport has already adjusted its routes.
On the topic of inflation and the cost of living, the minister emphasized a scientific approach to government intervention. He defended the energy and fuel subsidies and the Stabbilta mechanism, which aimed to stabilise the prices of essential goods. He argued against implementing broad, reactionary measures based on media pressure, suggesting that interventions must be tailored to specific types of inflation, whether imported, induced, or supply-side. He credited the country’s strong “war chest” and healthy finances for providing the cushion necessary to intervene where needed, while also noting that fuel hedging provides a level of price stability for the coming months.
Ultimately, Schembri framed the government’s approach as one of calculated progression. By moving from a survivalist focus on job creation to a sophisticated pursuit of high-tech niches, he believes the administration has created an economic engine capable of sustaining the country’s standard of living while beginning to address the secondary effects of that growth, such as urban planning and infrastructure coordination. He challenged political opponents to move beyond populist criticism and provide concrete alternatives, particularly regarding their views on population and specific economic sectors.
This is an abridged version of an interview which was carried in The Malta Independent on Sunday on 15 March
