Manufacturing in Malta: a prime source of resilience during COVID-19

The current administration has shown time and time again that it believes in the future of manufacturing in Malta. Its economic policy envisages that this sector returns to be at the centre of the Maltese economy. In fact, as part of its plans to future-proof our economy, Malta’s industrial space will receive an unprecedented €470 million investment over the coming years.

The experience of last year demonstrated why this line of thinking makes sense. In conditions that have wreaked havoc all around the world, Malta’s manufacturing sector has held its head high.

In 2020 the National Statistics Office indicated that this sector registered a value of €993 million, which was slightly higher than the €989 million in 2019. In the rest of Europe, by contrast, manufacturing’s value added fell by 6.5%. Last year the loss in manufacturing value added across Europe was equal to 134 times the whole annual value added of all of Malta’s manufacturing sector. Our manufacturing sector was therefore much more resilient than that in the rest of Europe. One of the prime causes of this was that operators in Malta benefitted from the fact that differently to operators in other countries, the Maltese Government did not close the industry but allowed firms to continue to operate throughout the pandemic.

Employment in Malta’s manufacturing sector rose slightly last year, by some 60 persons. Across Europe nearly three quarters of a million manufacturing workers lost their job. One in every 50 manufacturing jobs were lost. In the 2008 crisis, Malta’s manufacturing sector had shed 8% of its workforce, as against redundancies of 6% across the EU. It is clear that the policies put in place in 2020, primarily the wage supplement, have worked wonders to retain the productive capacity of our firms compared to the relative inaction in 2008.

Employment in Malta’s manufacturing sector rose slightly last year, by some 60 persons. Across Europe nearly three quarters of a million manufacturing workers lost their job. 

Moreover, international comparisons of what happened last year indicates how misguided the criticism made by some was, that the Maltese wage supplement was less generous than those of some European countries. Comparisons are odious, but the statistics speak for themselves. The Danes, Czechs, and Germans, with their supposedly more generous scheme, have still seen a significant fall in manufacturing employment, while in Malta not only there was no loss of employment, but there was even a small increase.   

The resilience of the Maltese industry reflects the close attention that its concerns have been given in recent years.

A reinvigorated Malta Enterprise has shown that it is truly committed to listen and to help established firms, and not just focus on potential newcomers. Gone are the days when manufacturing was seen as a dying sector that played second fiddle to new sectors. Since 2013, the stock of foreign direct investment (FDI) in manufacturing has risen to one billion Euro, an increase of a quarter. This flow has been continuous. To give a practical example, while after the crisis of 2008 there were just 12 approved FDI projects, during the pandemic year there were more than three times more approved projects. More FDI flowed to Malta during the pandemic year than in 2019. 

Back in the crisis of 2008, when Malta was credited to have weathered the economic storm, the Maltese Government was quite limited in the help it could provide. Years of fiscal mismanagement meant that assistance had to be limited. As a result, manufacturing’s value added fell by 16% between 2008 and 2009 in Malta, as against 13% in the rest of the EU. In Europe it took manufacturing firms until 2014 to regain their 2008 level of value added. In Malta it took till 2017 for firms to be back to where they had been in 2008. But since then, Malta’s manufacturing firms have not looked back. Manufacturing’s value added has risen by nearly a fifth since 2017 in Malta, a rise of nearly €160 million.

Given recent trends, it appears that in 2021 Malta will have for the first time in history a manufacturing sector that creates an annual turnover of over €1 billion. In fact, the most recent European Commission survey on business sentiment has found that 82% of Maltese manufacturing firms think their production will rise in the coming years, as against 28% across the EU.

It appears that in 2021 Malta will have for the first time in history a manufacturing sector that creates an annual turnover of over €1 billion.

The current administration has managed to reverse the trend of falling manufacturing employment seen since Malta joined the EU, and the sector has added nearly 2,000 workers since 2013. With the substantial projected investment in industrial infrastructure, together with the increased flows of FDI, there is increased optimism that Malta can start aspiring to go back to the level of manufacturing employment our nation had at the time of EU accession.

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