Economy of Malta: Wikis

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Economy of Malta
Currency Euro since 1 January 2008
Statistics
GDP $9.65 billion (2009 est.)
GDP growth -4% (2009 est.)
GDP per capita $23,800 (2009 est.)
GDP by sector agriculture: 1.4%; industry: 18%; services: 80.6% (2007 est.)
Inflation (CPI) 2.7% (2009 est.)
Gini index 26 (2007)
Labour force 171,000 (2008 est.)
Labour force
by occupation
agriculture: 2.3%; industry: 29.6%; services: 68% (2005 est.)
Unemployment 7.0% (January 2010)[1]
Main industries tourism, electronics, ship building and repair, construction, food and beverages, pharmaceuticals, footwear, clothing, tobacco, aviation services, financial services, information technology services
External
Exports $2.459 billion (2009 est.)
Export goods electrical machinery, mechanical appliances, fish and crustaceans, pharmaceutical products, printed material
Main export partners Germany 13.5%, Singapore 13%, France 12.2%, US 9.6%, UK 8.2%, Hong Kong 6.7%, Japan 6.4%, Italy 4.7% (2008)
Imports $3.94 billion (2009 est.)
Import goods mineral fuels and oils, electrical machinery, non-electrical machinery, aircraft and other transport equipment, plastic and other semi-manufactured goods; food, drink, tobacco
Main import partners Italy 28%, UK 13.5%, France 8.2%, Germany 7.4%, Singapore 6.4% (2008)
Gross external debt $188.8 million (2005)
Public finances
Public debt 66.2% of GDP (2009 est.)
Revenues $3.068 billion (2009 est.)
Expenses $3.511 billion (2009 est.)
Foreign reserves $348 million (31 December 2009 est.)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars

The strengths of the Economy of Malta are its limestone, a favourable geographic location, and a productive labour force. Malta produces only about 20% of its food needs, has limited freshwater supplies, and has no domestic energy sources. The economy is dependent on foreign trade, manufacturing (especially electronics), tourism and financial services. In 2003, over 1.2 million tourists visited the island[2]. Per capita GDP of $23,200 places Malta just above the middle of the list of European Union (EU) countries in terms of affluence. The island has joined the EU in 2004 despite having been divided politically over the question earlier. A sizeable budget deficit was a key concern, but recent initiatives by government have changed the situation dramatically enough for the country to be admitted into the eurozone as of 1 January 2008.

Contents

Economic history

Prior to 1800 the majority of Maltese were engaged in agriculture or fishing, although there was significant trade. Until then, Malta had very few industries except the cotton, tobacco, and shipyards industry. The dockyard was later used by the British for military purposes. At times of war, Malta's economy prospered due to its strategic location.

During the Napoleonic Wars (1800–1815), Malta's economy prospered and became the focal point of a major trading system. In 1808, two-thirds of the cargo consigned from Malta went to Levant and Egypt. Later, one-half of the cargo was usually destined for Trieste. Cargo consisted of largely British and colonial-manufactured goods. Malta's economy became prosperous from this trade and many artisans, such as weavers, found new jobs in the port industry.

In 1820, during the Battle of Navarino, which took place in Greece, the British fleet was based in Malta. In 1839, the Peninsular and Oriental Steam Navigation Company and East India Companies used Malta as a calling port on their Egypt and Levant runs.

In 1869, the opening of the Suez Canal benefited Malta's economy greatly as there was a massive increase in the shipping which entered in the port. The economy had entered a special phase. The Mediterranean Sea became the "world highway of trade" and a number of ships called at Malta for coal and various supplies on their way to the Indian Ocean and the Far East.

From 1871 to 1881, about 8,000 workers found jobs in the Malta docks and a number of banks opened in Malta. By 1882, Malta reached the height of its prosperity.

However, the boom did not last long. By the end of the 19th century, the economy began declining and by the 1940s, Malta's economy was in serious crisis. This was primarily due to the invention of large ships which had become oil-fired and therefore had no need to stop in the Grand Harbour of Malta to refuel. The British Government had to extend the dockyard.

At the end of World War II, Malta's strategic importance had reached a low point. Modern air warfare technology and the invention of the atomic bomb had changed the importance of the military base. The British lost control of the Suez Canal and withdrew from the naval dockyard, transforming it for commercial shipbuilding and ship repair purposes.

Modern economy

Major resources are limestone, a favorable geographic location, and a productive labor force. Malta produces only about 20% of its food needs, has limited fresh water supplies, and has few domestic energy sources. The economy is dependent on foreign trade, manufacturing (especially electronics and pharmaceuticals), and tourism. Economic recovery of the European economy has lifted exports, tourism, and overall growth. Malta adopted the euro on 1 January 2008.

Tourist arrivals and foreign exchange earnings derived from tourism have steadily increased since the 1987 watershed, in which there was growth from the previous year of, respectively, 30% and 63% (increase in terms of U.S. dollars). Following September 11, 2001 Terrorist Attack, the tourist industry did suffer some temporary setbacks.

With the help of a favourable international economic climate, the availability of domestic resources, and industrial policies that support foreign export-oriented investment, the economy has been able to sustain a period of rapid growth. During the 1990s, Malta's economic growth has generally continued this brisk pace. Both domestic demand (mainly consumption) boosted by large increases in government spending, and exports of goods and services contributed to this favorable performance.

Buoyed by continued rapid growth, the economy has maintained a relatively low rate of unemployment. Labour market pressures have increased as skilled labour shortages have become more widespread, despite illegal immigration, and real earnings growth has accelerated.

Growing public and private sector demand for credit has led -- in the context of interest rate controls - to credit rationing to the private sector and the introduction of noninterest charges by banks. Despite these pressures, consumer price inflation has remained low (2.2% according to the Central Bank of Malta 2nd Quarterly Report in 2007), reflecting the impact of a fixed exchange rate policy (100% hard peg to the euro, in preparation for currency changeover) and lingering price controls.

The Maltese Government has pursued a policy of gradual economic liberalization and privatisation, 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. While change has been very substantial, by international standards, the economy remains fairly regulated and continues to be hampered by some longstanding structural weaknesses.

There is a strong manufacturing base for high value-added products like electronics and pharmaceuticals, and the manufacturing sector has more than 250 foreign-owned, export-oriented enterprises. Tourism generates 35% of GDP. Film production is another growing industry (approx. 1,400,000 euros between 1997 and 2002), despite stiff competition from other film locations in Eastern Europe and North Africa, with the Malta Film Commission providing support services to foreign film companies for the production of feature cinema (Gladiator, Troy, Munich and Count of Monte Cristo, amongst others, were shot in Malta over the last few years), commercials and television series.[3]

In 2000 the economy grew by 7% in nominal terms and 4.3% in real terms. Unemployment was down to 4.4%, its lowest level in 3 years. Many formerly state-owned companies are being privatized - and the market liberalized.

Fiscal policy has been for some years directed toward bringing down the budget deficit after public debt grew from 24% of GDP in 1990 to 56% in 1999. By 2007, the deficit-to-GDP ratio is comfortably below 3%, as required for eurozone membership.

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Energy

Even though it has great potential for solar and wind power[4], Malta produces almost all its electricity using oil, importing 100% of it.[5] Recently, Silvio Berlusconi suggested building nuclear power plants on Malta for Italian power supply, creating Maltese outcry[6].

Facts and figures

Electricity - production: 1,620 GWh (1998)

Electricity - production by source:
fossil fuel: 100%
hydro: 0%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 1,507 GWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: potatoes, cauliflower, grapes, wheat, barley, tomatoes, citrus, cut flowers, green peppers; pork, milk, poultry, eggs

Currency: 1 euro = 100 cent since 1 January 2008
previously 1 Maltese lira = 100 cents;

Exchange rates: Maltese liri (LM) per US$1 - 0.4086 (January 2000), 0.3994 (1999), 0.3885 (1998), 0.3857 (1997), 0.3604 (1996), 0.3529 (1995) Irrevocably fixed conversion rate to the euro: Maltese liri (LM) per EUR1 - 0.4293 (2007)

See also

References


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