In the Chinese calendar, 2023 was the Year of the Rabbit. The Rabbit is a symbol of longevity, peace, and prosperity and 2023 had been predicted to be a year of hope. Yet, for many around the world, 2023 was anything but that. With the continuation of the war in Ukraine and the armed conflict in Gaza, combined with the staggering increase in interest rates and the impact on those with mortgages and on firms wanting to invest, the economic climate turned sour.
Here in Malta, despite all this, 2023 was another successful year, while the prospects for 2024 appear quite promising.
- Malta with the best economic growth across Europe in 2023, and in 2024
While international institutions ended up halving the economic outlook for the rest of Europe, and large countries such as the US were even given negative outlooks by rating agencies, Malta again positively surprised experts. In the first nine months of the year, Malta’s GDP grew by 6.5%. This was one-and-a-half times that predicted by experts and was the highest economic growth observed for a European country. Protected from the shock of energy prices that rocked foreign economies, families in our country continued to increase their consumption, so much so that there was a record of Maltese travelling abroad. At the same time, businesses employed thousands more workers while investing much more than they did before the pandemic. Besides this, tourism numbers started to exceed the pre-pandemic records at least two years ahead of projections.
Despite international challenges, for 2024 and even the following years, Malta is projected to remain the country with the highest rate of economic growth as the Government’s economic policies continue to lead to a sustained increase in national wealth.
- Unemployment falls to a historic low, and will remain the lowest in the EU this year
Even when it comes to unemployment, where the situation was already exceptional, Malta continued to register successes. Unemployment fell to a new historical low again. While the country had managed to register the lowest unemployment rate among the Euro area countries in the past, for the first time this year it grasped the title of being the European Union Member State with the lowest unemployment rate. Malta’s jobless rate fell to 2.3% in July, or around a third of the rate in 2013. Compared to January 2020, there are almost 50% fewer persons registering for work, meaning that unemployment has been decreasing by one person every two days since then.
While other countries will somewhat recover next year, experts believe that Malta will remain the country with the lowest unemployment rate in Europe in 2024 and even in the following years.
- Those dependent on social and unemployment assistance continue to fall
Compared to a year earlier, in the first nine months of 2023 there was a decrease of hundreds of persons on welfare benefits. Since January 2020, almost 2,650 people who previously had to resort to social and unemployment assistance instead stopped relying on these benefits. This means that every day there have been two less people on welfare. In sharp contrast with this, in the post-2008 economic crisis there was an increase of almost 900 people on social assistance in two years.
While dependency on welfare should decline further this year, the allocation on these benefits will increase sharply. In the latest Budget, unprecedented increases were announced in the benefit rates to those in a vulnerable situation, including a more generous unemployment benefit and yet another raise in the social assistance benefit.
- The middle class continues to prosper – more homeowners and more deposits with banks
While, across Europe, pessimism amongst households continued to rise due to the burdens of stifling electricity and fuel bills together with the staggering cost of mortgages, Malta was virtually the only country where these costs remained stable. As a result, Malta’s middle class continued to prosper. During the first ten months of 2023, households bought almost €3 billion worth of residential property, with thousands more becoming homeowners. A study by the Housing Authority revealed that more than half of first-time buyers were still single when they purchased. At the same time that private consumption continued to increase sharply, the amount of household deposits with Maltese banks still increased. This has now reached a record of €17 billion. Since January 2020, household deposits with banks have increased by almost €3 billion.
Economic forecasts indicate that private consumption will continue to pick up, but the Central Bank of Malta still expects that households will manage on average to save more than a quarter of their income.
- Social and capital expenditure reaches new records, but the deficit continues to decrease
This year the social expenditure will reach a record figure of €1.3 billion while capital investment should amount to €1.1 billion. The social benefit budget has grown as Government has strongly increased pensions, increased the children’s allowance, and widened the eligibility of inwork benefit while an additional mechanism against the cost of living started to operate. As for capital expenditure, there has been strong investment in energy, in schools, as well as in health. Despite this record investment, the Government not only reached the 5.5% fiscal target it had set a year earlier but the deficit is projected at an even lower 5%. Even the debt burden came far below what was predicted.
For this year, between social and capital investment, Government will again spend €2.4 billion. Despite this strong investment, the fiscal deficit will decrease to 4.5%. This reduction will occur even though, from this month, families will benefit from the largest increase ever in pensions and children’s allowance, the inwork benefit will be improved once again while the additional mechanism against the cost of living will double its eligible population to go to more than 90,000 families.
An optimistic outlook
While citizens in other countries are looking at 2024 with anxiety, with soaring bills and a squeeze in their income due to the effects of rising interest rates, in Malta the situation is diametrically opposite. With stable energy prices, our economy should remain the best in Europe, creating jobs and lowering unemployment and social dependency. A stronger economy, in turn, means that the Government can continue to improve social and capital investment while still strengthening the state of public finances.
The Chinese horoscope has 2024 as the Year of the Dragon, the perfect time for rejuvenated beginnings and setting the foundation for long-term success. Fingers crossed: this all seems quite likely for Malta at this stage.
Photo: Efrem Efre