This week I shared a post on my social media page, addressing how inflation is calculated and the widespread misconceptions surrounding it. My criticism targeted those who, despite lacking any grasp of economics, feel entitled to comment on figures they barely understand. I argued that monthly inflation figures serve primarily for monitoring purposes, while quarterly and annual inflation rates are what truly matter when it comes to policy decisions, especially from the European Central Bank’s perspective, where monetary policy tools are deployed based on broader trends, not isolated monthly fluctuations.
To explain, Malta’s inflation in March stood at 2.1%, below the EU average. However, by August, it had risen to 2.7%, slightly above the EU average. I noted that this could be seasonal, as the preceding months show a pattern oscillating between 2.1% and 2.7%. This kind of movement is not unusual and must be interpreted within a broader context. Nonetheless, several individuals from various walks of life jumped in with comments like “butter increased by 20%”, as though a single product’s price hike discredits the entire inflation methodology. I didn’t waste time engaging in reactive replies. Instead, I uploaded a detailed explanation later that evening to clarify how inflation is actually calculated, especially for those in Opposition who should know better before making public statements. Inflation is a weighted index, not a cherry-picked anecdote. If we are to have serious economic conversations, we must first understand the tools we’re using and basic economics.
Well, inflation is expected when economic growth outperforms expectations. Indeed, Malta’s economic performance continues to defy expectations. In a European landscape marked by stagnation, fiscal strain, and inflationary volatility, the Maltese economy has not only held its ground but surged ahead. October is the month where the annual budget is presented by the finance minister. In fact, the 2026 Pre-Budget Consultation Document, published earlier this month, offers more than a technical outline of fiscal priorities. It is a testament to the country’s resilience, discipline, and strategic foresight. And while the document is framed in the usual cautious optimism, the underlying numbers speak volumes. Malta’s real GDP growth for 2024 stood at 5.6%, the highest in the European Union. This is no statistical anomaly. It is the result of deliberate policy choices, targeted investment, and a refusal to succumb to the economic despair that has gripped much of the continent, including the phasing out of energy subsidies.
The document rightly emphasises the strength of domestic demand, the rebound in tourism, and the expansion of employment. But what it does not say explicitly – though it is evident between the lines – is that Malta’s economic model has matured. The country is no longer merely reacting to external shocks; it is shaping its own trajectory. This is most evident in the government’s handling of inflation. While other European economies wrestled with double-digit energy inflation, Malta maintained a zero-energy inflation rate. This was not achieved through market forces or chance; it was the direct result of government intervention, primarily subsidies, price controls, and a refusal to pass global energy costs onto households and businesses. Had these subsidies not been introduced and retained, Malta’s inflation would have spiralled into the same abyss that consumed much of the Eurozone countries. The document does not quantify the counterfactual, but the implication is clear. Surely, without these measures, the cost-of-living crisis would have been far more acute, and the social fabric far more strained, with individual opposition opponents scapegoating foreign workers.
This must not be interpreted that Malta is immune to inflationary pressures. Food and transport services remain slightly above EU averages, and imported inflation continues to seep through supply chains. But the government’s approach has been surgical. Rather than blanket stimulus or reactive austerity, it has opted for targeted relief – especially in 2023-2024 through the Stabbiltà scheme – ironically criticised by the Opposition despite its stabilising effect. Equally important, the debt-to-GDP ratio stands at 47.4%, well below the EU’s 60% threshold. This is not merely a compliance figure, but a signal of fiscal space. It allows the government to invest strategically, respond to shocks, and maintain credibility in international markets. In contrast, France’s debt exceeds 110%, Italy’s hovers above 140%, and Germany, despite its reputation for prudence, is grappling with rising deficits. Malta’s position is privileged, and it is the result of years of disciplined budgeting, efficient tax collection, and restrained spending. The deficit is narrowing, and the government is on track to meet the revised Stability and Growth Pact targets by 2026. This is not a coincidence. It is policy.
Malta’s labour market remains an outlier relative to its peers, with employment at 82.1% and female participation at 74.5%, both above EU averages. Unemployment dropped to 2.6% in April – the lowest in the Union – reflecting strong consumer confidence and economic stability. The new Labour Migration Policy aims to retain skilled foreign workers and reduce reliance on low-wage sectors, aligning productivity with growth. Tourism has evolved into a year-round economic pillar, welcoming 3.5 million visitors in 2024 and achieving €923.6 in per capita spending. Expanded air routes and targeted marketing have flattened seasonality. Financial services and gaming remain robust, with the former growing 9.8% annually (2019-2024) and gaming employment rising 4.1% in early 2025. Manufacturing shows mixed signals, with declines in electronics and apparel offset by recovery prospects, though skill gaps in AI and automation persist. Sustainability receives less emphasis this year, but renewable energy schemes and EV incentives continue expanding.
Certainly, the most pronounced result is that Malta maintains its zero-energy inflation rate, striking a pragmatic balance between climate goals and economic realism. Inflation, however, remains the central theme. The document’s implicit argument is that Malta’s inflation story is one of prevention, not reaction. The subsidies, price controls, and targeted relief measures have not only stabilised prices but preserved purchasing power. Household debt declined to 58% of GDP, while deposits rose by 8.9% year-on-year. The Loan-to-Deposit Ratio stabilised at 73.5%, indicating healthy bank liquidity and consumer confidence. These are the metrics that matter. They reflect not just macroeconomic stability but lived experience. And whatever others say to gain populist, although short-term gains with the electorate, the results are for everyone to see. The international comparisons are telling.
The Pre-Budget Document is not perfect. It glosses over certain structural challenges, including demographic shifts, housing affordability, and productivity constraints. But it is honest in its tone, measured in its ambition, and grounded in reality. It does not promise miracles; it outlines priorities. And in a political climate often dominated by conflicts and dangerous geopolitical narratives, that is refreshing. Malta’s economic performance is not a coincidence – it is the result of choices, some difficult, some unpopular, but all necessary. The government’s refusal to abandon subsidies, its commitment to fiscal discipline, and its focus on social investment have created a model that others are finally beginning to notice. And the economic model is sustainable, unlike what others are saying about quantity and that economic growth is achieved through growth in population. It’s a profoundly flawed argument, pushed by lawyers who remain clueless about economic theory and persist in embarrassing themselves with their pseudo-Malthusian jargon.
The challenge now is to sustain growth, because growth must be inclusive, inflation must remain contained, and fiscal space must be used wisely. The 2026 Budget will be the next test. But if the Pre-Budget Document is any indication, Malta is ready to present a striking budget.
