VALLETTA (MALTA) (ITALPRESS/MNA) – Malta’s labour-driven economic expansion is approaching its limits, the International Monetary Fund has warned, urging a shift toward productivity-led growth.
In its latest assessment, the IMF praised Malta’s strong recent performance but said the current model, heavily reliant on labour supply, is straining under infrastructure constraints, high population density and tight labour markets.
The Fund noted that Malta’s population density is now 15 times higher than the EU average, making continued reliance on foreign worker inflows unsustainable.
Instead, it called for a “strategic pivot” toward productivity-driven expansion to sustain long-term growth.
On public finances, the IMF highlighted progress in deficit reduction. The fiscal deficit fell from 4.4% of GDP in 2023 to an estimated 3.2% in 2025, with authorities targeting 2.6% by 2026.
Public debt remains stable and sustainable at around 47% of GDP.
However, the IMF recommended phasing out broad energy subsidies, which are projected to cost 0.8% of GDP in 2025, to free up resources for infrastructure and green transition investments.
Malta’s financial sector was described as resilient, though the Fund urged close monitoring of banks’ exposure to property. Loans to construction and real estate account for 72% of private sector lending.
Structural bottlenecks continue to weigh on the business environment, particularly in the labour market and judiciary.
Labour shortages are acute, with 68% of services firms reporting staffing difficulties, compared with an EU average of 24%.
The IMF called for a more targeted, skills-based migration policy and stronger domestic upskilling efforts.
While the economic outlook remains positive, the Fund warned of downside risks from geopolitical tensions and regional conflicts, which could disrupt trade and trigger renewed energy price spikes in Malta’s highly open economy.
-Photo IPA Agency-
(ITALPRESS).
