ECONOMY
During the first eight months of 2007, economic growth increased by 3.6%. Possessing few indigenous raw materials and a very small domestic market, Malta has based its economic development on the promotion of tourism, accounting for roughly 30% of GDP, and exports of manufactured goods, mainly semi-conductors, which account for some 75% of total Maltese exports. Since the beginning of the 1990s, expansion in these activities has been the principal engine for strong growth in the Maltese economy.
Tourist arrivals and foreign exchange earnings derived from tourism have steadily increased since the late 1970s. The introduction of low-cost flights in 2007 was the main contributor to the 7.6% increase in tourist arrivals since January 2007. Many cruise lines have also added Malta as a destination in 2007, and the sector has seen a 26.6% increase since January 2007. The relatively flexible labor markets kept unemployment fairly steady at 3.9% between January-June 2007. With its highly educated, English-speaking population, Malta has seen growth in high value-added manufacturing and in the services sector, away from the traditional low-cost manufacturing in textiles. The banking system remains highly concentrated with two of the four local commercial banks accounting for about 90% of total loans and deposits.
The Maltese Government has pursued a policy of gradual economic liberalization, taking some steps to shift the emphasis in trade and financial policies from reliance on direct government intervention and control to policy regimes that allow a greater role for market mechanisms. Malta's accession into the EU marked the total dismantling of protective import levies on industrial products, increasing the outward orientation of the economy. Malta joined the Exchange Rate Mechanism II (ERM-II) in 2005 to put itself on the path to enter the Eurozone in January 2008; under the ERM-II, the Maltese Lira has maintained a hard peg to the Euro. In July 2007, the European Economic and Financial Council voted to approve Malta's entry to the Eurozone for January 1, 2008.
The fiscal situation in consolidating public finances has improved over recent years. The budget deficit was brought down from 10.7% of GDP in 1998 to 2.5% of GDP in 2006, a figure that was below the 3% required by the Maastricht criteria. For this reason the European Commission abrogated the excessive deficit procedure for Malta earlier in 2007. The budget deficit for 2007 is estimated to be 1.6% of GDP.
GDP (2006): $6.39 billion.
Annual growth rate: 5.5% (at 2006 market prices), 2.9% (2006 real terms).
Per capita income: $15,165.
National resources: Limestone, salt.
GDP composition by sector, 2006: Services (75% of GDP). Industry (22.5% of GDP): Types--, semiconductors, electronics, information and communications technology, shipbuilding and repair, rubber and plastic products, toys, jewelry, food, beverages. Agriculture (2.5% GDP): Products--fodder crops, potatoes, onions, Mediterranean fruits and vegetables.
Trade (2006): Exports--$2.79 billion: Types--machinery and transport equipment, miscellaneous manufactured articles, chemicals, semi-manufactured goods, food, mineral fuels, lubricants, and related materials, beverages and tobacco, crude materials. Major markets--Eurozone area, U.S., Singapore. Imports--$4.24 billion: Types--Machinery and transport equipment, miscellaneous manufactured articles, semi-manufactured goods, food, mineral fuels, lubricants and related materials, chemicals, beverages and tobacco, crude materials, miscellaneous transactions and commodities. Major suppliers--Eurozone area, U.K., Singapore, U.S.
Trade balance (2006): $1.48 billion.
Budget (2007 revised estimates): Revenues $2.86 billion; expenditures $3 billion; capital expenditures of $383 million.
Average exchange rate (2006): LM1=$2.930 (rate fluctuates)
