A recent study by the Central Bank of Malta found that the country’s shadow economy accounted for 15.3% of GDP in 2024, the lowest level recorded in the past twenty years. While any informal economic activity remains a challenge, the long-term trend tells a positive story: Malta is moving steadily towards a more transparent and regulated economy. 

The shadow economy refers to otherwise legal economic activity that is hidden from authorities to avoid taxes, social security contributions, or regulatory obligations. What makes the latest figures significant is that they represent a substantial improvement from the estimated 22.8% recorded in 2005, demonstrating a clear decline in the shadow economy over time. 

This progress did not happen by accident. Over recent years, Malta has invested heavily in digitalisation, stronger tax administration, improved compliance systems, and more effective labour market regulation. The increased use of electronic payments, online government services, and modern enforcement mechanisms has made it easier for businesses and workers to operate within the formal economy. These reforms have helped create a fairer environment for both employers and employees.

The benefits are felt across society. When more economic activity is declared, government revenue increases without raising tax rates. This allows greater investment in public services, pensions, healthcare, education, infrastructure, and social benefits. It also protects honest businesses from unfair competition by those seeking to avoid their obligations.

For younger generations, this trend is particularly important. A stronger formal economy means more secure employment, better workplace protections, stronger pension contributions, and greater confidence among investors considering Malta as a destination for growth and innovation. It is no coincidence that Malta continues to register among the strongest economic growth rates in Europe while maintaining low unemployment levels. 

The latest findings show that Malta’s economy is not only growing. It is becoming more transparent and more resilient. The reduction of the shadow economy to its lowest level in two decades reflects the impact of sustained reforms and responsible governance under the Labour government. It is another indication that Malta’s economic success is being built on stronger foundations, benefiting workers, businesses, and future generations alike.