Malta has experienced positive economic growth during this year, and economists contacted by this newsroom have predicted more steady growth for 2019.
JP Fabri, an economist and director at ARQ Group, noted that the International Monetary Fund (IMF) projected Malta as one of the fastest growing economies – pointing out that in 2019, the economy will be supported by domestic demand and investment, driven mainly by large-scale infrastructural projects that are expected to commence.
"Tourism is also expected to remain a very strong contributor to growth. The service-sectors will too remain strong economic drives."
Daniel Gravino, a director at Grant Thornton, also expected that, barring something exceptional, the Maltese economy will continue to grow at a steady pace. Perhaps slightly slower than it did in 2017-18, but driven by the very same sectors that have grown steadily over the past few years.
"This will bring about challenges that we've become used to. Expect a continue shortage of labour that is sure to put pressure on employers to increase wages."
Both also touched on the reliance on foreigners to bolster the skills gap on the island.
Fabri singled out the issue of a "continue shortage of skilled human resources", an issue Gravino also touched on by noting that "employers will continue to rely on foreigners as an additional source of labour supply".
Maria Giulia Pace, an economist within EY Malta's Valuation, Modeling and Economics team, also pointed towards third-party reports which indicated that the strong GDP growth experienced in the last years will persist but ease slightly, estimated at around 4.9% in 2019, and mostly driven by domestic demand.
Maintaining Existing Sectors
All three economists homed in on the fact that there must be constant vigilance in maintaining existing, and growing major sectors that sustain the Maltese economy: mainly tourism, iGaming, new technologies such as blockchain and AI, and the property market.
Tourism has been a staple in the Maltese economy for as long as one can remember, and as Pace points out, "the industry is experiencing world-wide growth and the Maltese industry has been witnessing an increased yearly demand for its product offering".
She partly attributed this to the increased exposure brought about by Valletta 2018, the improved connectivity through different airlines, as well as Malta Tourism Authority's efforts to target new tourist niches.
Fabri also said that "tourism is also expected to remain a very strong contributor to growth".
"The Blockchain Island" will also be a title that Malta will have to live up to in 2019, with Fabri saying that 2019 will be the "true test of whether Malta's reputation as the blockchain island will truly materialize".
"Any new sector is not only based on a good regulatory set-up, but more importantly on its implementation and support ecosystem."
Referring to the banking sector, he insisted that it remains a key challenge for Malta's attractiveness, and argues that additional banking channels and service providers are needed should Malta continue to aspire to attract international companies.
Gravino commented that maintaining a good performance in those sectors that have been driving Malta's economic growth – online gaming, financial services, etc. – will help to enable the take-off of similar sectors – namely blockchain.
As a bonus point, he also suggested investing in unrelated sectors with huge potential such as the aviation sector – as the number of people travelling in the world is expected to double over the next 15-20 years. And the good news is that we already have a solid base for it – aircraft maintenance, aviation schools, etc.
Property Market
On the local property market, Gravino noted that the significant increase in prices we've seen over the past three years has been supported by a growing [foreign] population and increasing incomes, and he says that some 1-2 years following Planning Authority approvals, we might expect a slowdown in property price growth – most likely in 2020.
Pace characterized 2018 as a "construction frenzy and price hikes in both the renting and the selling of property", which she says has inevitably fuelled the discussion on sustainability.
"The ongoing influx of foreigners is possibly an indication that prices will keep their current trajectory. This also means that first time buyers will continue to find it hard to get on the property ladder, even though current budget incentives might assist such groups."
Global Economy
The happenings of other nations also affect what happens locally, and as Fabri puts it, "the emergence of trade wars; primarily instigated by the US will have repercussions on global growth. Compounded by the uncertainty surrounding Brexit, the external economy can start lowering its growth momentum."
From a policy perspective, he said that the arsenal available to policy makers is also more limited than in 2008 – pointing out that with monetary policy tightening, and the rise of populist and nationalist-leaning governments, cross-border cooperation might be harder.
Gravino noted that we should keep an eye out for developments in the world and European economies, including Brexit.
But he wouldn't anticipate huge impacts on Malta in the short term.
from The Malta Independent http://bit.ly/2rZwf73
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