{ "title": "IMF Executive Board Concludes 2024 Article IV Consultation with Malta", "publication": "IMF News, January 22, 2025", "sourceUrl": "https://www.imf.org/en/news/articles/2025/01/22/pr25012-malta-imf-executive-board-concludes-2024-article-iv-consult", "canonical": "https://www.imf.org/en/news/articles/2025/01/22/pr25012-malta-imf-executive-board-concludes-2024-article-iv-consult", "overlayPath": "/en/news/articles/2025/01/22/pr25012-malta-imf-executive-board-concludes-2024-article-iv-consult/index.md", "summary": "Washington, DC – January 15, 2025: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Malta. The Board considered and endorsed the staff appraisal on a lapse of time basis.", "publishDate": "2025-01-22", "sections": [ { "heading": "Overview and recent developments", "content": "- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Malta; the Board considered and endorsed the staff appraisal on a lapse of time basis.\n- Malta has experienced remarkable growth over the past decade, primarily driven by export-oriented service industries, such as tourism and online gaming.\n- Growth is expected to moderate but remain among Europe’s highest in the near term, accompanied by tight labor markets.\n- Inflation has fallen to around 2 percent, but some inflationary pressures remain in the service sector.\n- Strong growth has been supported by an influx of foreign workers and tourists, increasing density and straining infrastructure and public services.\n- The financial system has demonstrated resilience amid successive shocks." }, { "heading": "Risks and medium-term outlook", "content": "- Over the medium term, Malta’s economy is projected to continue outperforming other European countries, but structural constraints will weigh on growth potential.\n- Risks to the outlook are tilted to the downside.\n - External downside risks: spillovers from intensified Russia’s war in Ukraine and the Israel-Gaza conflict; deepening geoeconomic fragmentation.\n - Domestic downside risks: higher-than-expected wage growth, resulting in higher inflation.\n - Upside scenario: tourism exports could grow faster than anticipated, boosting near-term growth but adding to capacity pressure.\n- Malta’s external position in 2024 is expected to be substantially stronger than the level implied by fundamentals and desirable policies.\n- The key challenge is to enhance a productivity-driven growth strategy for socially and environmentally sustainable growth." }, { "heading": "Fiscal policy and public finances", "content": "- The authorities’ commitment to fiscal consolidation is welcome; emphasis should be on shifting policy away from energy subsidies toward investment and innovation.\n- The overall deficit is expected to decline to around 2¾ percent of GDP by 2029, while public debt is projected to remain around 50 percent of GDP, below 60 percent of the EU’s debt ceiling.\n- Energy subsidies are expected to remain sizable, accounting for 20 percent of the fiscal deficit.\n- Policy recommendation: gradually but decisively exit the fixed energy price policy by shifting to more targeted subsidies and strengthening market pricing mechanisms.\n- Fiscal space freed from subsidy reform should be allocated to investment (including green), services (e.g., health), and innovation support.\n- The authorities’ long-term developmental vision (“Malta Vision 2050”) should be reflected in fiscal planning via a long-term fiscal framework that accounts for population aging, climate transition, and infrastructure needs." }, { "heading": "Tax policy and corporate income tax (CIT) reform", "content": "- Authorities should develop and disseminate a roadmap for corporate income tax (CIT) reform in line with the EU’s Directive on Pillar II to guide taxpayers and investors, pending EC clarification of Qualified Refundable Tax Credits.\n- Deferring Pillar II implementation allows adaptation to international developments but risks ceding revenue to jurisdictions that adopt the directive sooner.\n- The roadmap should encompass reforms addressing CIT (for both foreign and domestic companies) and personal income tax." }, { "heading": "Financial sector stability and macroprudential policy", "content": "- The financial system is sound and stable; however, risks remain due to substantial exposure to real estate.\n- Recommendation: tighten macroprudential policy stance.\n - Continue vigilant monitoring of real estate markets and close remaining data gaps in the commercial real estate sector.\n - Supervisors should ensure banks maintain robust underwriting and appraisals for loans to the real estate sector.\n - Continue thorough assessments of cyber risk resilience in financial institutions.\n - Consider raising the sectoral systemic risk buffer rate and broadening its scope beyond residential mortgages, given increasing banks’ exposures to real estate.\n- Further easing of ECB monetary policy combined with ongoing strong growth in Malta could stimulate additional credit expansion in real estate." }, { "heading": "AML/CFT framework and judicial reforms", "content": "- The authorities’ commitment to strengthening the AML/CFT framework and advancing judicial reforms is welcome.\n- Recommendations:\n - Remain vigilant in monitoring emerging threats, such as trade-based money laundering.\n - Continue enhancing the risk-based approach by ensuring gatekeepers (e.g., financial institutions) align business and customer risk assessments with the 2023 National Risk Assessment results.\n - Advance judicial reforms, including strengthening the appointment process of the chief justice and improving the efficiency of the justice system." }, { "heading": "Productivity, innovation, and labor market policies", "content": "- Continued efforts are needed to raise productivity and foster innovation for sustainable long-term growth.\n- Authorities should evaluate the effectiveness of schemes (e.g., grants, tax incentives) supporting innovation activities, start-ups, and scale-ups, focusing on size and design.\n- The establishment of Malta’s Venture Capital Fund is a positive step.\n- Innovation and digitalization require a skilled workforce; recommendations include improving educational outcomes, increasing STEM enrollment, enhancing digital skills, and boosting adult learning.\n- Having made notable progress in boosting female participation, authorities should continue initiatives to further narrow gender gaps across various measures of gender equality, including representation." }, { "heading": "Climate mitigation and adaptation", "content": "- Concerted efforts from both the public and private sectors are essential to achieving Malta’s ambitious climate goals.\n- Additional mitigation measures and changes in public behavior are necessary to meet the 19 percent reduction target (relative to 2005 levels) by 2030 under the Effort Sharing Regulations.\n- For climate adaptation, complete the vulnerability risk assessment and update the adaptation plan accordingly." }, { "heading": "Selected economic indicators (2021–26)", "content": "- Real GDP (expenditure) (% change): 2021: 13.5, 2022: 4.1, 2023: 7.5, 2024: 5.0, 2025: 4.0, 2026: (blank)\n- Domestic demand (% change): 2021: 12.0, 2022: 8.1, 2023: 1.7, 2024: 5.1, 2025: 4.3, 2026: (blank)\n- Output gap (% potential output): 2021: 2.3, 2022: -0.8, 2023: 0.0, 2024: 0.6, 2025: 0.4, 2026: 0.1\n- Gross national savings (% GDP): 2021: 33.4, 2022: 24.4, 2023: 25.9, 2024: 25.6, 2025: 25.5, 2026: 25.7\n- Investment (% GDP): 2021: 24.0, 2022: 25.2, 2023: 19.6, 2024: 19.3, 2025: 19.2, 2026: 19.7\n- Consumer prices (HICP, avg) (% change): 2021: 0.7, 2022: 6.1, 2023: 5.6, 2024: 2.5, 2025: 2.2, 2026: 2.0\n- Consumer prices (HICP, eop) (% change): 2021: 2.6, 2022: 7.3, 2023: 3.7, 2024: 2.1\n- Employment (Labor % change): 2021: 3.0, 2022: 6.7, 2023: 5.4, 2024: 3.8\n- Wages (Labor % change): 2021: 2.7, 2022: 3.9, 2023: 3.6\n- Unemployment rate (%): 2021: 3.5\n- Net migration (% population): 2021: 4.2, 2022: 1.9, 2023: 1.8\n- Credit to the private sector (% change): 2021: 5.8, 2022: 8.2, 2023: 8.3, 2024: 6.3\n- Credit to the private sector (% GDP): 2021: 73.4, 2022: 72.6, 2023: 69.5, 2024: 66.7, 2025: 66.2, 2026: 66.3\n- Short term deposit rate: 2021: -0.5, 2022: 0.3, 2023: 3.4, 2024: …\n- Long-term bond yield: 2021: 0.5, 2022: 2.4\n- Net lending/borrowing (General government finances % GDP): 2021: -7.0, 2022: -5.2, 2023: -4.5, 2024: -4.0, 2025: -3.5, 2026: -3.1\n- Structural balance (% potential GDP): 2021: -3.8, 2022: -1.9, 2023: -3.6, 2024: -3.2\n- Structural primary balance (% potential GDP): 2021: -2.8, 2022: -1.0, 2023: -2.6, 2024: -2.3, 2025: -1.8\n- Consolidated debt (gross) (% GDP): 2021: 49.6, 2022: 49.4, 2023: 47.4, 2024: 49.0, 2025: 49.7, 2026: 50.2\n- Current account (%GDP): 2021: 9.4, 2022: 6.4, 2023: 6.0\n- International investment position, net: 2021: 105, 2022: 100, 2023: 93, 2024: 95, 2025: 97, 2026: 98\n- Gross debt 1/: 2021: 374, 2022: 334, 2023: 323, 2024: 337, 2025: 328\n- Net debt 1/: 2021: -186, 2022: -173, 2023: -171, 2024: -184, 2025: -191, 2026: -198\n- MEMORANDUM ITEMS:\n - Nominal GDP (bn €): 2021: 16.7, 2022: 18.2, 2023: 20.7, 2024: 22.4, 2025: 23.9, 2026: 25.3\n - Population (1,000): 2021: 516, 2022: 520, 2023: 542, 2024: 553, 2025: 563, 2026: 573\n - GDP per capita ($): 2021: 38,230, 2022: 36,959, 2023: 41,205, 2024: 43,938, 2025: 45,224, 2026: 47,020\n - Real effective exchange rate: 2021: -0.6, 2022: -3.7, 2023: 1.1\n\nIMF Executive Board Concludes 2024 Article IV Consultation with Malta, January 22, 2025.\n\n---\n\n\n References\n\n- Malta and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/01/22/pr25012-malta-imf-executive-board-concludes-2024-article-iv-consult" } ], "bullets": [ "[Markdown version](/en/news/articles/2025/01/22/pr25012-malta-imf-executive-board-concludes-2024-article-iv-consult/index.md)", "[Structured JSON version](/en/news/articles/2025/01/22/pr25012-malta-imf-executive-board-concludes-2024-article-iv-consult/index.json)", "[Bundle manifest](/en/news/articles/2025/01/22/pr25012-malta-imf-executive-board-concludes-2024-article-iv-consult/bundle-manifest.json)", "Published: January 22, 2025", "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Malta; the Board considered and endorsed the staff appraisal on a lapse of time basis.", "Malta has experienced remarkable growth over the past decade, primarily driven by export-oriented service industries, such as tourism and online gaming.", "Growth is expected to moderate but remain among Europe’s highest in the near term, accompanied by tight labor markets.", "Inflation has fallen to around 2 percent, but some inflationary pressures remain in the service sector.", "Strong growth has been supported by an influx of foreign workers and tourists, increasing density and straining infrastructure and public services.", "The financial system has demonstrated resilience amid successive shocks.", "Over the medium term, Malta’s economy is projected to continue outperforming other European countries, but structural constraints will weigh on growth potential.", "Risks to the outlook are tilted to the downside.", "Malta’s external position in 2024 is expected to be substantially stronger than the level implied by fundamentals and desirable policies.", "The key challenge is to enhance a productivity-driven growth strategy for socially and environmentally sustainable growth.", "The authorities’ commitment to fiscal consolidation is welcome; emphasis should be on shifting policy away from energy subsidies toward investment and innovation.", "The overall deficit is expected to decline to around 2¾ percent of GDP by 2029, while public debt is projected to remain around 50 percent of GDP, below 60 percent of the EU’s debt ceiling.", "Energy subsidies are expected to remain sizable, accounting for 20 percent of the fiscal deficit.", "Policy recommendation: gradually but decisively exit the fixed energy price policy by shifting to more targeted subsidies and strengthening market pricing mechanisms.", "Fiscal space freed from subsidy reform should be allocated to investment (including green), services (e.g., health), and innovation support.", "The authorities’ long-term developmental vision (“Malta Vision 2050”) should be reflected in fiscal planning via a long-term fiscal framework that accounts for population aging, climate transition, and infrastructure needs.", "Authorities should develop and disseminate a roadmap for corporate income tax (CIT) reform in line with the EU’s Directive on Pillar II to guide taxpayers and investors, pending EC clarification of Qualified Refundable Tax Credits.", "Deferring Pillar II implementation allows adaptation to international developments but risks ceding revenue to jurisdictions that adopt the directive sooner.", "The roadmap should encompass reforms addressing CIT (for both foreign and domestic companies) and personal income tax.", "The financial system is sound and stable; however, risks remain due to substantial exposure to real estate.", "Recommendation: tighten macroprudential policy stance.", "Further easing of ECB monetary policy combined with ongoing strong growth in Malta could stimulate additional credit expansion in real estate.", "The authorities’ commitment to strengthening the AML/CFT framework and advancing judicial reforms is welcome.", "Recommendations:", "Continued efforts are needed to raise productivity and foster innovation for sustainable long-term growth.", "Authorities should evaluate the effectiveness of schemes (e.g., grants, tax incentives) supporting innovation activities, start-ups, and scale-ups, focusing on size and design.", "The establishment of Malta’s Venture Capital Fund is a positive step.", "Innovation and digitalization require a skilled workforce; recommendations include improving educational outcomes, increasing STEM enrollment, enhancing digital skills, and boosting adult learning.", "Having made notable progress in boosting female participation, authorities should continue initiatives to further narrow gender gaps across various measures of gender equality, including representation.", "Concerted efforts from both the public and private sectors are essential to achieving Malta’s ambitious climate goals.", "Additional mitigation measures and changes in public behavior are necessary to meet the 19 percent reduction target (relative to 2005 levels) by 2030 under the Effort Sharing Regulations.", "For climate adaptation, complete the vulnerability risk assessment and update the adaptation plan accordingly.", "Real GDP (expenditure) (% change): 2021: 13.5, 2022: 4.1, 2023: 7.5, 2024: 5.0, 2025: 4.0, 2026: (blank)", "Domestic demand (% change): 2021: 12.0, 2022: 8.1, 2023: 1.7, 2024: 5.1, 2025: 4.3, 2026: (blank)", "Output gap (% potential output): 2021: 2.3, 2022: -0.8, 2023: 0.0, 2024: 0.6, 2025: 0.4, 2026: 0.1", "Gross national savings (% GDP): 2021: 33.4, 2022: 24.4, 2023: 25.9, 2024: 25.6, 2025: 25.5, 2026: 25.7", "Investment (% GDP): 2021: 24.0, 2022: 25.2, 2023: 19.6, 2024: 19.3, 2025: 19.2, 2026: 19.7", "Consumer prices (HICP, avg) (% change): 2021: 0.7, 2022: 6.1, 2023: 5.6, 2024: 2.5, 2025: 2.2, 2026: 2.0", "Consumer prices (HICP, eop) (% change): 2021: 2.6, 2022: 7.3, 2023: 3.7, 2024: 2.1", "Employment (Labor % change): 2021: 3.0, 2022: 6.7, 2023: 5.4, 2024: 3.8", "Wages (Labor % change): 2021: 2.7, 2022: 3.9, 2023: 3.6", "Unemployment rate (%): 2021: 3.5", "Net migration (% population): 2021: 4.2, 2022: 1.9, 2023: 1.8", "Credit to the private sector (% change): 2021: 5.8, 2022: 8.2, 2023: 8.3, 2024: 6.3", "Credit to the private sector (% GDP): 2021: 73.4, 2022: 72.6, 2023: 69.5, 2024: 66.7, 2025: 66.2, 2026: 66.3", "Short term deposit rate: 2021: -0.5, 2022: 0.3, 2023: 3.4, 2024: …", "Long-term bond yield: 2021: 0.5, 2022: 2.4", "Net lending/borrowing (General government finances % GDP): 2021: -7.0, 2022: -5.2, 2023: -4.5, 2024: -4.0, 2025: -3.5, 2026: -3.1", "Structural balance (% potential GDP): 2021: -3.8, 2022: -1.9, 2023: -3.6, 2024: -3.2", "Structural primary balance (% potential GDP): 2021: -2.8, 2022: -1.0, 2023: -2.6, 2024: -2.3, 2025: -1.8", "Consolidated debt (gross) (% GDP): 2021: 49.6, 2022: 49.4, 2023: 47.4, 2024: 49.0, 2025: 49.7, 2026: 50.2", "Current account (%GDP): 2021: 9.4, 2022: 6.4, 2023: 6.0", "International investment position, net: 2021: 105, 2022: 100, 2023: 93, 2024: 95, 2025: 97, 2026: 98", "Gross debt 1/: 2021: 374, 2022: 334, 2023: 323, 2024: 337, 2025: 328", "Net debt 1/: 2021: -186, 2022: -173, 2023: -171, 2024: -184, 2025: -191, 2026: -198", "MEMORANDUM ITEMS:", "[Malta and the IMF](http://www.imf.org/external/country/MLT/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2025/01/22/pr25012-malta-imf-executive-board-concludes-2024-article-iv-consult/index.md", "json": "/en/news/articles/2025/01/22/pr25012-malta-imf-executive-board-concludes-2024-article-iv-consult/index.json", "bundleManifest": "/en/news/articles/2025/01/22/pr25012-malta-imf-executive-board-concludes-2024-article-iv-consult/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T03:35:03.449Z" }