The economy of Malta is a highly industrialised service-based economy. It is classified as an advanced economy by the International Monetary Fund and is considered a high-income country by the World Bank and an innovation-driven economy by the World Economic Forum. It is a member of the European Union and of the eurozone, having formally adopted the euro on 1 January 2008.

The strengths of Malta's economy are its advantageous location, being situated in the middle of the Mediterranean Sea at a crossroads between Europe, North Africa and the Middle East, its fully developed open market economy, multilingual population (88% of Maltese people speak English), productive labour force, low corporate tax and well developed finance and ICT clusters. The economy is dependent on foreign trade, manufacturing (especially electronics), tourism and other services in the tertiary sector of the economy. In 2014, over 1.7 million tourists visited the island.

Malta's GDP per capita in 2024, adjusted by purchasing power parity, stood at $67,682 and ranked 15th in the list of EU countries in terms of purchasing power standard. In the 2013 calendar year, Malta recorded a budget deficit of 2.7%, which is within the limits for eurozone countries imposed by the Maastricht criteria, and Government gross debt of 69.8%. At 5.9%, Malta had the sixth-lowest unemployment rate in the EU in 2015.

Malta is the 33rd-most democratic country in the world according to the Economist Intelligence Unit's Democracy Index with an upper-middle score on V-Dem's Democracy Indices.

History In the mid-thirteenth century, Abate Giliberto indicated that the population of the Maltese islands consisted of 1,119 families. At the time, Maltese agriculture transitioned from subsistence agriculture to a more commerce-based one through the cultivation for export of cotton and cumin, which were introduced during the Arab period. As a result, there was a need to import food from neighbouring Sicily. Eventually, in the late fourteenth century, cotton production became the principal agricultural product in the archipelago, since it was one of the few production hubs in the western Mediterranean. Processing cotton to weave it into the fabric was a labour-intensive activity, so the boost in cotton trade led to the population surging to 33,000. In an exploratory mission in 1524, the Knights of St. John noted how the islands were dependent on grain imports since agriculture was dedicated to the production of cotton, honey and cumin.

During the Napoleonic Wars (1800–1815), Malta's economy prospered and became the focal point of a major trading system. In 1808, two-thirds of the cargo consigned from Malta went to Levant and Egypt. Later, one half of the cargo was usually destined for Trieste. Cargo consisted of largely British and colonial-manufactured goods. Malta's economy became prosperous from this trade and many artisans, such as weavers, found new jobs in the port industry.

In 1820, during the Battle of Navarino, which took place in Greece, the British fleet was based in Malta. In 1839, P&O and East India Company used Malta as a calling port on their Egypt and Levant runs.

In 1869, the opening of the Suez Canal benefited Malta's economy greatly as there was a massive increase in the shipping which entered in the port. The economy had entered a special phase. The Mediterranean Sea became the "world highway of trade" and a number of ships called at Malta for coal and various supplies on their way to the Indian Ocean and the Far East. From 1871 to 1881, about 8,000 workers found jobs in the Malta docks and a number of banks opened in Malta. By 1882, Malta reached the height of its prosperity.

However, the boom did not last long. By the end of the 19th century, the economy began declining and by the 1940s, Malta's economy was in serious crisis. This was primarily due to the invention of large ships which had become oil-fired and therefore had no need to stop in the Grand Harbor of Malta to refuel. The British Government had to extend the dockyard.

At the end of World War II, Malta's strategic importance had reached a low point. Modern air warfare technology and the invention of the atomic bomb had changed the importance of the military base. The British lost control of the Suez Canal and withdrew from the naval dockyard, transforming it for commercial shipbuilding and ship repair purposes.

Overview The Maltese economy is dependent on foreign trade, manufacturing (especially electronics and pharmaceuticals), and tourism. Malta adopted the Euro currency on 1 January 2008.

Tourist arrivals and foreign exchange earnings derived from tourism have steadily increased since 1987. Following the September 11 attacks, the tourist industry suffered a temporary setback. With the help of a favorable international economic climate, the availability of domestic resources, and industrial policies that support foreign export-oriented investment, the economy has been able to sustain a period of rapid growth. Growing public and private sector demand for credit has led — in the context of interest rate controls — to credit rationing to the private sector and the introduction of non-interest charges by banks. Despite these pressures, consumer price inflation has remained low (2.2% according to the Central Bank of Malta in 2007), reflecting the impact of a fixed exchange rate policy (100% hard peg to the euro, in preparation for currency changeover) and lingering price controls.

There is a strong manufacturing base for high value-added products like electronics and pharmaceuticals, and the manufacturing sector has more than 250 foreign-owned, export-oriented enterprises. Tourism generates around 15% of GDP. Film production in Malta is another growing industry (approx. 35 million euros between 1997 and 2011), despite stiff competition from other film locations in Eastern Europe and North Africa, with the Malta Film Commission providing support services to foreign film companies for the production of feature cinema, commercials and television series.

From 2001 to 2005 the mean GDP real growth was 0.4% due to Malta losing pace in tourism and other industries. Unemployment was down to 4.4%, its lowest level in 3 years. Many formerly state-owned companies are being privatised—and the market liberalised.

Fiscal policy has been directed toward bringing down the budget deficit after public debt grew from a negative figure in 1988 to 56% in 1999 and 69.1% in 2009. By 2007, the deficit-to-GDP ratio was comfortably below 3% as required for eurozone membership, but due to pre-election spending has gone up to 4.4% in 2008 and 3.8% in 2009.

Economic sectors

Industry +Average annual employment and average annual earnings in manufacturing industry (2007)Malta in Figures - National Statistics Office, Malta, 2008 SectorAverage annualemploymentAverage annualearnings per capitain eurosFood and beverages; tobacco2,87313,441Textiles and textile products42215,512Wearing apparel and clothes73311,698Leather and leather products1859,308Wood and wood products7812,000Paper and paper products26515,698Publishing and printing1,66917,615Chemicals and chemical products1,03819,052Rubber and plastic products1,57815,254Other non-metallic mineral products76611,928Fabricated metal products59614,451Machinery and equipment n.e.c.44613,518Electrical machinery and apparatus1,40916,515Radio, TV and communication equipment3,16818,673Medical, precision and optical instruments87715,582Motor vehicles, trailers and semitrailers5010,220Other transport equipment25820,938Furniture and manufacturing n.e.c.1,59715,753Total18,00815,812

Banking

+Largest banks in Malta, 2022RankCompanyFoundedMarket %1Bank of Valletta197444.67 %2HSBC Bank Malta p.l.c.199920.48 %3APS BANK P.L.C.19108.41 %4MeDirect Bank (Malta) plc20046.87 %5FIMBank plc19955.70 %6Lombard Bank Malta plc19553.85 %7BNF Bank plc20083.13 %

Agriculture

Agriculture constitutes a relatively small proportion of the GDP of Malta, at around 0.7%. The country produces a diverse range of crops, including potatoes, olives, and tomatoes. Animal livestock within Malta include cattle, goat, pigs and poultry.

Infrastructure Transport

Malta has an airport, Luqa International Airport, and two majors ports, Malta Freeport and Valletta Cruise Port. Malta Freeport is used for all cargo ships and imports-exports while Valletta Cruise Port is only used by cruise ships. The Malta Freeport reported revenues of 170 million euros, while €90 million came from the Valletta Cruise Port, totaling €260 million. The Freeport connects Malta with 110 others ports in the world including 55 in the Mediterranean. Furthermore, 2,189 container ships carried 2.80 million TEU of container traffic in and out of Malta Freeport in 2022. The Valletta Cruise Port welcomed 900,000 passengers in 2023, contributing €53 million to the Maltese economy.

Luqa International Airport serves 35 different airlines with 115 destinations. In 2023, 7.8 million people travelled through the airport, providing $2.7 billion in revenues to the Maltese economy, equivalent to 24% of Malta's Gross Domestic Product (GDP). Specifically, the former air flag carrier of Malta Air Malta, KM Malta Airlines since 2024, had a revenue of €679.4 million in 2022. Another new airline operating from Luqa Airport, Universal Air, started operations in April 2024 with a fleet of 6 aircraft. The airlines, airport, and surrounding businesses employ almost 7,000 people.

Energy

Despite a great potential for solar and wind power,"MALTA – Renewable Energy Fact Sheet". Europa. January 2007. <> Malta produces almost all its electricity from oil, importing 100% of it."MALTA – Energy Mix Fact Sheet". Europa. January 2007. <> Energy and the cost of energy, which is oft-quoted as the highest in Europe, was a key issue in the 2013 election.

International trade

Malta's principal merchandise exports include integrated circuits, banknotes and other printed securities, pharmaceuticals and refined petroleum products. In 2023, the country exported US$3.5 billion worth of goods, with Germany, Japan, Italy and Hong Kong as its largest identified export markets.

Merchandise imports amounted to US$8.4 billion in 2023. Major imports included refined petroleum products, motorboats, integrated circuits, aircraft and pharmaceuticals. Italy, Germany, France, Spain and the Netherlands were Malta's largest import partners.

Labour market and social welfare

Poverty Poverty and social exclusion are significant problems in Malta. As of 2008, an estimate of 15% of Malta's citizens were living below the poverty line, which was slightly better than the EU average of 17% at the time. To address the issue of poverty, on 24 December 2014 Malta addressed poverty in the six branches of social services, health and environment, culture, income and social benefits, education and employment, by unveiling the National Strategic Policy for Poverty Reduction and Social Inclusion; this will stay in effect from 2014 to 2024. Under this policy, stakeholders will be involved in the discussion of how to reduce hardships experienced by families living in Malta.

Unemployment benefits Benefits for unemployment are given out based on contributory and non-contributory schemes. Contributory schemes distribute unemployment benefits within 50 weeks of contribution. Non-contributory schemes a Social Unemployment Benefit is granted after a means test to the head of a household. In order to qualify for unemployment benefits, a person must be able to do work and have registered as unemployed.