Malta Economy

Malta Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax system

Basic data

Like many other European economies, Malta has gradually begun to recover from the effects of the pandemic. In 2021, GDP grew by 9.4%, with the level of GDP slightly exceeding that of 2019. Growth was driven by domestic demand, although net exports also supported the recovery. The unemployment rate averaged 3.7% between January and September 2021, down from 4.3% in the same period in 2020. It remained well below its average since 2003 and the average rate in the euro area.

According to, the Central Bank of Malta expects the Maltese economy to grow by 6.0% in 2022, 5.3% in 2023 and 3.8% in 2024. The pre-pandemic level of economic activity would thus be reached earlier than predicted in the bank’s previous projections. Domestic demand is again expected to be the main driver of growth in 2022, reflecting strong growth in private and government consumption. In addition, net exports should also contribute significantly as they accelerate, while imports should grow at a slower pace. The slowdown in imports reflects an expected decline in investment in 2022 following extraordinary spending in some sectors in 2021. The unemployment rate is expected to be 3.5% in 2022 and return to in 2023 and 2024 %. At the same time, labor market tensions are expected to ease gradually as as net migration flows increase over the projection horizon. This should ease wage pressures. Year-on-year inflation based on the Harmonized Index of Consumer Prices is expected to increase to 2.7% in 2022 from 0.7% in 2021, which largely reflects the impact of import price pressures on all components of inflation except for energy. After that, import price pressures are expected to ease somewhat, and thus inflation should slow to 1.8% by 2024.

The main driving force of the Maltese economy is the tertiary sector. The leading sectors are tourism and financial services, the maritime sector (shipbuilding), textiles and clothing. As in most developed economies, the manufacturing sector (which contributes 17% to GDP) is becoming less important than the tertiary sector. Some areas of the manufacturing sector have undergone significant changes in recent years, particularly the textile, clothing and footwear industries, which benefit from greater investment. Most of these industries are foreign owned. Industrially demanding sectors (processing of agricultural and food products and furniture) successfully face foreign competition, also with regard to the removal of trade barriers and customs duties.

Malta’s export products are machinery and mechanical equipment, mineral fuels, oils, pharmaceuticals, printed books and newspapers, aircraft and parts, toys, games and sports equipment. It imports mineral fuels, oils and products, electrical machinery, aircraft and their parts, machinery and mechanical equipment, plastic and other semi-finished products, vehicles and their parts.

Table from MOP + additionally balance of payments, indebtedness/GDP.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 5.3 -8 5.3 6.0 5.3
GDP/population (USD/PPP) 45,757.30 43,940.70 47,140.00 50,670.00 53,060.0
Inflation (%) 1.6 0.8 0.7 2.7 2.7
Unemployment (%) 3.6 4.4 3.6 3.5 3.6
Export of goods (billion USD) 3 2.5 3.2 3.4 3.7
Import of goods (billion USD) 7.1 5.5 6.1 6.4 6.6
Trade Balance (Billion USD) -1.8 -1.6 -1.9 -1.9 -1.6
Industrial production (% change) 1.5 0.1 2.6 5.2 1.5
Population (millions) 0.5 0.5 0.5 0.5 0.5
Competitiveness ON ON ON ON ON
OECD export risk ON ON ON ON ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -9.3
Public debt (% of GDP) 57.7
Current account balance (%) -3.4
Taxes (%) 2022
F.O 35
VAT 18

Public finances in 2021 reflected the decline in economic activity and the introduction of fiscal support related to the COVID-19 pandemic. According to the Central Bank of Malta, the fiscal balance deficit for 2021 is almost -9.3% of GDP. Public debt rose to 57.7% of GDP, although it remains well below the eurozone average. The pandemic left its mark on the current account balance, which for the first time since 2016 recorded a deficit already in 2020 and also in 2021, which is a result of the increase in imports. Tourism-related income, while recovering, has remained well below pre-pandemic levels. The general government deficit is expected to narrow significantly as the COVID-19 measures ease and macroeconomic conditions continue to improve. By 2024, the deficit should be reduced to 3.3% of GDP. The ratio of government sector debt to GDP should be 60.9% of GDP in 2024,

In 2021, the net inflow on the capital account increased slightly compared to 2020. The current account balance, adjusted for cyclical effects, showed a deficit of 3.4% in 2021.

The debt-to-GDP ratio is forecast to remain above pre-pandemic levels. The extent to which the Maltese government will be able to reduce debt will depend on the extent and speed of the economic recovery and the rate of growth of the debt ratio and fiscal consolidation. It will depend on the evolution of the pandemic, the duration of the conflict in Ukraine and the ability of the Maltese government to implement the planned reforms under the National Recovery and Resilience Plan.

Banking system

The domestic banking sector remains a reliable pillar of the Maltese economy, in which a significant part of GDP is generated by financial services in addition to trade. The financial sector creates around 8.5% of GDP and contributes significantly to employment. About 90% of foreign investments go into it by volume, and in recent years it has recorded steady, robust year-on-year growth. The Malta Financial Services Authority (MFSA) registered 120 bank branches, 26 banks, 48 ​​financial institutions and 63 insurance institutions in Malta in 2021. The banking sector is strong and enjoying good health. Stability indicators for the Maltese banking sector show that capital adequacy is maintained safely above required minimums. According to Moody’s, Malta’s banking system is stable thanks to the resilience of the domestic banking system, whereas domestic banks follow a conservative and traditional banking model. In 1994, the Maltese government passed a series of laws to make Malta an offshore center for financial services. According to estimates, over 2,500 offshore companies are registered in Malta, which developed their activities on the basis of a favorable tax policy. A turning point in the development of the financial sector was Malta’s entry into the EU. The Malta Financial Services Authority (MFSA) is the country’s regulatory body responsible for licensing and supervising credit and financial institutions.

The most important banks in Malta are:

Bank of Valletta: established in 1974, based in Santa Venera. The bank employs approximately 1,900 employees. It provides personal banking products and services, life and pension insurance and various payment cards. The bank also offers business banking products and services for SMEs, asset management services and foreign exchange services. It operates through a retail network of 36 branches and agencies, as well as through representation in Australia, Belgium, Italy and Libya. Total assets: EUR 12.91 billion.

HSBC Bank Malta: a subsidiary of HSBC Europe BV, is a leading international banking and finance group in Malta. Based in Valletta. It has 11 branches and agencies in Malta, including one branch on the island of Gozo. Total assets: EUR 6.75 billion.

Other notable banks are FIM Bank, Sparkasse Bank Malta, IIG Bank, Akbank Tas, Agri Bank, BNF and FCM Bank.

Tax system

The Maltese tax system is based on the tax principles of the United Kingdom. Its main pillar is the system of full tax offsets, which completely eliminates double taxation of company profits. Shareholders receiving dividends are entitled to a tax deduction in the amount of tax deducted from the profit from which the dividends are paid. The overall tax burden in Malta is below average within the EU. Typology of income that is taxed: income of companies, self-employed persons, employees and capital income.

Corporate income taxation

The tax is imposed on the income of companies. Taxable income is the profits of resident entities as well as the profits of non-resident companies from doing business in Malta. Taxable corporate income is taxed at 35%. Tax reliefs are provided, for example, in connection with agreements on the avoidance of double taxation – taxes applied to companies, including taxes on dividends that were paid in the home country of the foreign company, will not be required in Malta (note: the Czech Republic has signed this agreement with Malta).

Taxation of the income of natural persons Taxation is progressive and the income of natural persons is subject to a maximum tax of 35%. Individual degrees of progressive taxation may change from year to year. Spouses can apply for joint income taxation.

Indirect taxes


The basic rate is 18%, but there are exceptions. Food and medicine are zero-rated. Exceptions also apply to domestic and international transport, aircraft deliveries and repairs, exports, provision of services to ship passengers, rental of apartments to tourists, hotel services, electricity supplies, printing materials, medical equipment, sports, cultural and religious activities, mass media advertising, deliveries water. From the annual turnover of goods over the amount of more than 7 thousand EUR, the obligation to register tax payers arises.

Information on VAT can be found on the website of the Malta VAT Department.

Malta offers good tax conditions with significantly lower costs for setting up and operating a company. This is also helped by the long-term political and economic stability resulting from EU membership, as well as the versatility of Maltese companies in international tax planning. It is possible to trade through Malta with a maximum tax burden of 5%. The Maltese government is preparing to overhaul its tax system, which has allowed foreign companies to benefit from extremely low tax rates, but it is not yet certain whether these companies will have to pay higher taxes in practice. According to the plan, the new tax regime should be introduced by 2023.

Malta Economy