Mbagħad jar’Alla… God will provide

There is a familiar Maltese expression that captures a particular way of approaching uncertainty: Mbagħad jar’Alla. Loosely translated, it means that when the time comes, God will provide, or somehow things will work themselves out. 

It is an expression rooted in faith, optimism and the resilience that has helped generations of Maltese navigate difficult circumstances. Yet, it can also describe a tendency to postpone difficult decisions in the hope that tomorrow will accommodate what we are reluctant to confront today. In economic policymaking, optimism is valuable, but it cannot substitute for preparation, investment and the deliberate development of productive capacity. 

Two weeks have passed since Budget 2027, allowing the immediate reactions to settle. Much of the debate has understandably focused on the measures announced, their beneficiaries and the additional costs imposed on particular sectors. However, the more important question concerns the direction of economic policy.

The finance minister’s acknowledgement that Malta must move from growth driven by volume towards growth driven by value deserves recognition. However, if this is genuinely our objective, we must examine whether our policy choices are strengthening the economy’s capacity to generate greater value or primarily redistributing the proceeds of existing economic activity. 

Economists distinguish between actual output and potential output. The former measures what an economy produces today, while the latter reflects what it can sustainably produce using its labour, capital, technology and institutions. This distinction is particularly relevant to Malta. Growth can remain strong because employment expands, consumption increases and government expenditure supports demand.

Yet, sustainable prosperity requires improvements in productive potential through stronger skills, investment, innovation and more efficient resource allocation. An economy can become larger without becoming proportionately more productive, and this is precisely the challenge Malta must confront. 

Opportunity cost 

The super bonus provides an interesting illustration. A tax-free payment of up to €1,000 will undoubtedly be welcomed by workers and households. Additional disposable income can ease financial pressures and support consumption. However, from a macroeconomic perspective, the measure primarily operates on the demand side.

With an estimated annual cost of approximately €200 million, it increases purchasing power without directly increasing the economy’s capacity to produce additional goods and services. Its economic effect therefore differs fundamentally from investment in education, technology, infrastructure or workforce development. 

This distinction matters because Malta operates in an environment of low unemployment and persistent capacity constraints. When additional purchasing power enters an economy where supply cannot respond quickly, part of the resulting demand may translate into higher prices rather than greater real output.

The inflationary impact is not inevitable. Some households will save their payments, while spending on imports may have limited effects on domestic prices. Nevertheless, locally supplied services and other capacity-constrained activities could experience additional pressures. The magnitude of these effects would depend on spending patterns and economic conditions, but the underlying concern deserves attention. 

There is also the question of opportunity cost. Public resources devoted to recurring transfers cannot simultaneously finance alternative priorities. Investment in training, digital skills, childcare capacity or business technology adoption could generate longer-term economic returns.

This does not make financial assistance undesirable, particularly when households face genuine pressures. However, it illustrates the distinction between expenditure that supports purchasing power today and expenditure that expands productive capacity tomorrow. A sustainable economic strategy must achieve an appropriate balance between the two. 

The measures affecting third-country nationals raise an equally important economic question. Higher work-permit fees, an annual infrastructure contribution and restrictions on certain public benefits have been presented partly as a means of ensuring that foreign workers contribute fairly towards the services and infrastructure they use.

The principle that economic activity should reflect its wider social costs is reasonable. Malta’s rapid employment expansion has undoubtedly placed pressure on housing, transport and public services. However, the effectiveness of these measures depends on whether they change the incentives sustaining the existing economic model. 

Increasing the cost of employing foreign workers does not automatically encourage businesses to become more productive. A firm dependent on labour-intensive processes may absorb the additional expense, pass it on to customers or seek alternative recruitment arrangements. In sectors experiencing labour shortages, additional costs may eventually translate into higher prices or reduced competitiveness. More importantly, if businesses lack the financing, technology or expertise needed to modernise, higher employment costs alone will not deliver the desired transformation. They may simply make the existing model more expensive. 

There is another dimension that deserves consideration. Non-EU nationals are not merely users of infrastructure and public services. They are also contributors to production, taxation and social security. Their economic contribution varies considerably according to skills, employment conditions and sector.

A healthcare professional, engineer and hospitality worker perform different economic functions, yet all may be essential to the operation of particular industries. A more sophisticated labour migration framework should therefore distinguish between different skills and economic needs, while encouraging employers to invest in productivity rather than rely indefinitely on additional recruitment. 

Economic tension 

Taken together, the super bonus and measures affecting foreign workers reveal a tension in the budget’s economic approach. On one side, government supports consumption through additional household income. On the other, it introduces costs that may increase business expenses or constrain labour supply.

Where demand remains strong and productive capacity responds slowly, some adjustment may occur through prices. This is not a prediction of an inflationary surge, but it demonstrates why fiscal measures must be assessed collectively rather than individually. Neither measure, by itself, provides a clear mechanism for increasing potential output. 

The broader challenge remains productivity. Malta has demonstrated an impressive capacity to create employment and attract economic activity, but improvements in output per hour worked have been less consistent. This has consequences for wages, competitiveness and public finances.

When productivity growth is limited, businesses struggle to increase wages sustainably, while government becomes increasingly dependent on continued economic expansion to finance public commitments. For a small island facing physical and environmental constraints, generating more value from existing resources is essential. 

A genuine productivity strategy must operate within firms and across the wider economy. Businesses need incentives to invest in machinery, software, automation, research and workforce development. Smaller enterprises require support to modernise and overcome barriers to growth. Capital must also flow towards activities capable of generating greater value.

Malta’s longstanding preference for property investment illustrates the importance of developing financing channels that support innovation, enterprise expansion and internationally competitive businesses. The more favourable tax treatment of qualifying reinvested profits is a welcome development, but it needs to form part of a broader transformation agenda. 

Education remains perhaps the most consequential element of this discussion. The workforce that will sustain Malta’s economy in 2040 and 2050 is already being shaped in today’s classrooms. Weaknesses in literacy, numeracy and broader learning outcomes are therefore not simply educational concerns. They represent future constraints on productivity, innovation and social mobility. Malta needs to place educational outcomes at the centre of its economic strategy, with greater attention to teaching quality, foundational skills, vocational pathways, digital competence and lifelong learning. A more productive economy cannot emerge without a workforce capable of supporting it. 

Anticipating demand 

Infrastructure is equally fundamental. Congestion, utility constraints, administrative delays and pressure on public services impose real economic costs. These reduce the effective productivity of labour and capital, even when headline growth remains strong. Malta has invested significantly in infrastructure, and this progress should be recognised.

However, future investment must increasingly anticipate demand rather than react to pressures once they emerge. Transport, energy, water, digital connectivity and land-use planning should be approached as interconnected components of productive capacity, supported by long-term priorities and transparent assessment of economic returns. 

This brings us directly to Vision 2050. The national vision provides a valuable framework for sustainable growth, resilience and improved quality of life. Yet its credibility will depend on how effectively present decisions advance these ambitions.

Annual budgets cannot deliver every structural reform, but they should demonstrate a clear connection between expenditure, incentives and long-term outcomes. Are we increasing output per hour worked? Are educational outcomes improving? Is business investment becoming more productive? Are infrastructure constraints being reduced? These questions should become central measures of economic progress. 

None of this diminishes the importance of social protection or immediate financial assistance. A productive economy must also be inclusive, and government has a legitimate responsibility to support households facing economic pressures. Indeed, stronger productivity is ultimately what makes higher wages, better pensions and improved public services sustainable.

The challenge is to balance today’s legitimate needs with investment in the capabilities that will sustain prosperity over time. This requires evaluating not only what policies deliver immediately, but also what they enable the economy to achieve in the future. 

Perhaps the broader lesson is that resilience and preparedness are not the same thing. Malta has repeatedly demonstrated its ability to respond to external shocks and changing circumstances.

That adaptability remains a national strength. Preparedness, however, requires anticipating constraints and addressing them before they become urgent. It means investing in skills before shortages deepen, improving infrastructure before congestion becomes overwhelming and encouraging productivity before additional labour becomes the default response to growth. 

Ultimately, Mbagħad jar’Alla may be a reassuring expression in everyday life, but it should not become an approach to economic development. Supporting consumption and recovering the costs associated with economic expansion may be legitimate objectives, but neither should be confused with strengthening productive potential.

The Malta of 2050 will be shaped by the capabilities we develop today, the investment we encourage and the institutions we strengthen. The future will always contain uncertainty, but preparing for it should never be left to chance.