IMF Evaluates Malta Economy and Financial Sector

The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Malta.^[1] Malta’s economy has maintained robust momentum, with annual growth averaging nearly 7 percent over the past decade led by tourism, online gaming, and professional services alongside significant inflows of foreign workers. GDP growth is estimated to have slowed to 3.9 percent in 2025, which is still considerably higher than the EU average. The influx of foreign workers that fueled economic activity in the past has also strained infrastructure and public services, highlighting the limits of the current labor-intensive growth model. This labor-driven growth is expected to continue in the medium term, but slow in longer term since Malta cannot sustain a continued population increase. Inflation declined to slightly above 2 percent while fiscal consolidation has kept public debt on sustainable path. The financial sector remains sound and well-capitalized.

Executive Board Assessment^[2]

Executive Directors commended the authorities’ sound macroeconomic management with Malta enjoying one of the highest growth rates in Europe over the past decade, and public debt on a sustainable trajectory. Noting that risks are tilted to the downside and Malta’s labor‑intensive growth model appears to be approaching its limits, Directors emphasized the importance of transitioning toward a more productivity‑driven growth path, while preserving macroeconomic stability.

Directors welcomed the narrowing fiscal deficit and the authorities’ commitment to the EU fiscal framework. They agreed that fiscal consolidation efforts should be sustained to maintain public debt at current levels and create fiscal space for investments in human capital, infrastructure, and innovation. Directors also saw scope to enhance revenue mobilization, including through continued digitalization of tax systems, and improvements in VAT administration and corporate taxation. Strengthening public financial and investment management remain important. Recognizing the authorities’ social objectives, Directors recommended gradually phasing out untargeted electricity and fuel subsidies while protecting vulnerable groups.

Directors welcomed the strength of the banking sector citing high capital and liquidity buffers and low non‑performing loans. They urged vigilance on vulnerabilities from rising exposures to real estate and on the growing role of non‑bank financial institutions, digital finance and crypto‑asset providers. Directors welcomed the planned expansion of macroprudential measures and encouraged continued strengthening of financial sector supervision, data availability, and stress‑testing. Noting the progress made, they encouraged the authorities to sustain progress in strengthening the AML/CFT framework.

Directors underscored that advancing structural reforms is essential to sustaining high growth. They emphasized the importance of addressing labor shortages and persistent skills mismatches alongside stepped‑up investment in infrastructure and technology to support increasingly higher value‑added activities. In this context, they welcomed the authorities’ new migration and education strategies and emphasized the importance of improving judicial efficiency and sustaining progress in digitalization and innovation. Directors welcomed efforts in strengthening energy security and climate resilience and encouraged continued progress toward the green transition.