Malta faces challenge of an overflow of jobs and high growth

Success breeds a new set of challenges, but they are challenges that with a can-do attitude they can be overcome

Recent reports by the International Monetary Fund present a statement of affairs of how the Maltese economy is performing and discuss the structural improvements that we have seen over the past five years.

In the last Malta country report, the IMF notes the "prudent fiscal policy and successful structural reforms" that have made the Maltese economy "one of the fastest growing countries in the EU after the crisis".

The report takes a sober and apolitical look at the Maltese economy from a technical perspective and it lists the successes, such as an increase in productivity and growth, and the challenges these successes bring with them, such as new infrastructure and housing needs.

Another report, published over the past days and one that was requested by the Maltese Government, is the Financial System Stability Assessment. Overall, it presents a positive bill of health of the financial sector, especially the banking system, which the IMF says is well-capitalised, liquid and whose profitability is healthy.

Non-performing loans (loans which are defaulting) is a commonly-used indicator of the financial system and the economy, and the IMF notes that the Maltese index of this indicator is below the euro area.

The IMF also lists a number of recommendations that are needed to improve the sector – mainly focusing on more resources for supervisory improvement, anti-money laundering measures and regulatory strengthening.

One has to understand the context of these recommendations – every financial system has shortcomings that needs to be addressed. If you look at the same type of report, by the same authority (IMF), for a financial giant like Germany it breaches similar themes.

The IMF had noted that Germany needed to 'improve the effectiveness of the anti-money laundering and countering financial terrorism supervisory framework over cross-border banks, implement measures to strengthen the oversight role of the banks’ supervisory board and other similar concerns on banking regulations and oversight.

This shows that some of the challenges are common and not specific to one country, as sometimes some try to give the impression, and that issues with the financial sector are usually systematic on a continental and global platform, and not limited to one country.

You may ask – why does all this matter and how does this affect me? The stability of the financial stability is a little bit like the stability of the ground underneath your feet. You don't really notice until it starts to wobble. Having a sound financial structure means families can be in a position to get a house loan, business can loan money for expanding their commerce and there is a smooth financial system in place for the economy to grow.

The financial stability of a country is very important for investment and together with the political and economical considerations, is one of the most important factors for an investor. This, in essence, means better jobs and work opportunities for our society.

The well-being of the financial sector is important because it is the well-being of the country. Our projects in education, health, infrastructure and the rest all depend on the ability of the economy to perform and to create the wealth for the Government to invest for the general public. It is all a chain and while people sometimes are put off by the technical jargon of economical reports, they are very important indicators on the path that our country is taking.

Success breeds a new set of challenges, but they are challenges that with a can-do attitude they can be overcome. In other EU countries, challenges involve the creation of jobs and having minuscule economic growths.

In Malta, the challenge is how to handle the overflow of jobs and the high growth rate. Through well-planned policies these are challenges that can be analysed and dealt with to make sure that the prosperity we are seeing in our economy flows back to all sectors of society.