Malta, where are the babies?

Behind the reassuring statistics of growth and low unemployment lies a challenge that will define Malta’s long-term future far more profoundly than any fiscal deficit or quarterly GDP release. The country’s fertility rate has fallen to one of the lowest in Europe, well below replacement levels. 

Population growth has continued in recent years, but only because of inward migration. Fewer children are being born, and the economic, social, and cultural consequences of this trend are difficult to overstate. This was also highlighted by Finance Minister Clyde Caruana as Malta’s biggest challenge.  

Low fertility is a structural issue, not a passing phase. It reflects a collision between the realities of modern life and the decision to start a family. In Malta, as elsewhere, the cost of housing has escalated, leaving many young couples struggling to secure a home. The demands of work and commuting leave little space for balance, while the cost and logistics of childcare weigh heavily on household budgets. Traditional networks of extended family support, once so central to Maltese life, have weakened, leaving parents more isolated. In this environment, the decision to have children becomes not just an emotional one but a daunting economic calculation. 

Fewer workers to sustain pensions 

The arithmetic is stark. With fertility rates this low, the ratio of working-age people to retirees will worsen sharply. Fewer workers will have to sustain the pensions and healthcare of a growing elderly population. That will place increasing strain on public finances. The short-term solution has been migration, which has filled labour gaps and sustained growth. But migration alone cannot carry the system indefinitely. It raises important questions about integration, cohesion, and the capacity of infrastructure to keep up with rising demand. A population policy focused only on numbers misses the deeper point. The real issue is why Maltese families are hesitant to have children in the first place. 

Other countries offer lessons. France has long recognised the importance of family policy, offering generous parental leave, heavily subsidised childcare, and tax benefits that ease the cost of raising children. The Nordic countries pioneered systems of paternal leave that shifted culture as much as policy, creating a model where raising children is seen as a shared responsibility. Estonia invested in digital government services that streamline access to family benefits, removing the friction that can deter parents from seeking support. Even Singapore, facing chronically low fertility, has experimented with housing grants, cash incentives, and tax breaks to tilt the economic equation in favour of families. Results have been mixed, but the recognition that demographics shape destiny has been clear. 

Piecemeal interventions not enough 

For Malta, piecemeal interventions will not be enough. What is needed is a systemic approach that reduces the barriers to parenthood across several fronts. Housing policy must create accessible and affordable pathways for young families. Childcare services need to be not only available but also flexible and of high quality. Workplaces must evolve towards genuine family-friendliness, recognising that flexible arrangements are not a perk but a necessity in sustaining a modern workforce. Cultural reinforcement is just as important. Parenthood should not be seen as a sacrifice that undermines career prospects but as a valued choice supported by society. 

Tax reform is a central part of this equation. Families need to feel a tangible financial benefit from their decision to raise children. One option is to grant tax-free income for the first five years after the birth of a first child, easing the affordability crunch at the stage when expenses are most pressing. For second children, direct cash incentives could provide additional support, recognising the broader social value of larger families. These measures would not solve the demographic challenge alone, but they would send a clear signal that the state recognises and shares the financial burden of child-rearing. Over time, such reforms can tilt household decision-making and make parenthood more economically viable. 

Policy innovation could also play a role. Malta could pilot savings accounts for children where the state matches contributions, building long-term security while easing parental concerns. Housing schemes could be linked to family formation, with targeted grants for young couples purchasing their first home after having children. Pension reforms could recognise periods of child-raising as contributory, protecting parents, especially mothers, from gaps in retirement security. Together, these measures would create an environment where having children is not an economic penalty but a supported life choice. 

Turning a timebomb into opportunity 

The pre-budget document acknowledges Malta’s demographic reality, but acknowledgment is not enough. This is the most profound structural issue the country faces. An economy cannot thrive indefinitely without renewal through new generations. Migration can buy time, but it is no substitute for a sustainable demographic base. 

As an economist, my view is clear. Malta must place fertility and family policy at the centre of its long-term economic strategy. This means confronting the affordability barriers that make parenthood prohibitive, reshaping tax and benefit systems to ease the burden, and reinforcing cultural norms that value family life as a cornerstone of national resilience. The tools exist, the examples are plentiful, and the need is urgent. What is required now is the courage to weave them into a coherent national agenda. 

Because no matter how disciplined our budgets or how strong our short-term growth, an economy without children is ultimately an economy without a future. The real test of statesmanship is whether Malta can turn its demographic timebomb into an opportunity to design a society where family life is viable, dignified, and aspirational once again. That would be the most profound investment Malta could make in its own resilience.