Analysis: Top 5 sectors behind the acceleration of Malta’s economy

2020 was a tough year for the Maltese economy. Yet economic activity, as measured by real value added, was still 52% higher than it was in 2012 even one considers changes in prices over the intervening eight years.

One can divide the years since EU accession into two equal periods: 2004 to 2012 and 2012 to 2020. The first eight years after joining the EU saw economic sectors increasing their value added by €1.4 billion. By contrast, the past eight years saw a rise of €3.6 billion, despite the heavy impact of the pandemic in 2020 (which lowered value added by €0.6 billion).

The Eurostat database sub-divides economic activity into 64 different sectors, ranging from agriculture to personal services. delves deeper to understand which sectors explain the extraordinary acceleration in economic expansion post 2013. 

But before – correcting a wrong impression

While most commentators would point to remote gaming, construction and financial services, Eurostat data shows a rather different picture. For instance, despite being one of the Maltese economy’s main sectors, since 2013 the real value added of the remote gaming sector rose by €170 million. This was well below the €463 million rise observed between 2004 and 2012. Similarly, during the last eight years financial services grew by a considerable €221 million, but this rise was less than the €346 million increase observed in the first eight years after EU accession. Finally, as one would expect, the contribution of accommodation and food services was stronger during the first period, but this was solely due to the pandemic. Until 2019, this sector had seen a €0.4 billion increase compared to 2012. 

#1  Information and Communication sector

The top sector that underpinned the economic boom post-2012 was the information and communication sector. Thissaw a rise of €818 million, accounting for nearly a third of the difference in economic expansion between the two eight-year periods. This sector involves activities such as telecommunications, publishing, motion pictures and computer programming. That such a sector was the key driver of economic progress is very promising for the success prospects of Malta’s digital economy transformation. 

#2  Professional, Scientific and Tech

The second most important sector was professional, scientific and technical activities, with the expansion since 2013 being three times faster than in the post-accession period. Again, another promising development as this sector is highly skilled and creates very well-paid jobs. Its success indicates that Malta’s position in the global value chain is improving.

#3  Construction

While construction was the third most important sector behind the economic boom, one must consider that it was equivalent to a quarter of the expansion seen in the information and communication sector. Furthermore, in 2020 the value added of the construction sector, at €494 million, was just above the €448 million observed pre-EU accession. This shows that what has happened in recent years is that construction activity recovered after a substantial decline induced by the austerity of the pre-2013 administration. 

#4  Industry

A similar analysis can be made about industry. This sector had faced stagnation pre-2013 and was losing its pre-eminence in the Maltese economy. Instead, since 2013 industry has seen its value-added rise by nearly a third of a billion Euro, or nearly a tenth of the overall economic expansion in the last eight years. Amongst the key contributors were currency printing, plastic products and pharmaceuticals.  

#5  Ads and Market Research

The fifth most important sector that accounts for the economic boom was advertising and market research. Data shows that prior to 2013 this sector’s contribution was minor. Since then, it has accounted for an expansion that was larger in absolute terms to that of construction. This sector is mostly export-oriented and operates mostly through digital platforms, again promising well for Mata’s digital transformation.

The great diversification

The other five sectors were rental and leasing, wholesale and retail, public administration, real estate, and security, service, office administrative and support activities. Of these, the rental and leasing sector is the only one that is relatively new. This includes such sub-sector as the leasing of aviation equipment and the leasing of intellectual property. In the latter areas, Malta is achieving a similar rate of success as that previously achieved in the maritime sector.

An in-depth analysis of sectoral developments reveals not only the buoyant activity of most sectors, but also the great diversification of the Maltese economy. The expansion of the services sector, particularly towards digital activity has been extraordinary, but at the same time traditionally important sectors such as construction, manufacturing and agriculture and fisheries have resumed growth. While not featuring among the top ten sectors, there are a swathe of other smaller sectors that saw considerable growth, with prime examples being private health and education. All this points towards the potential for the future expansion of the Maltese economy.

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