Malta’s strong economy faces infrastructure, housing and labour challenges - IMF

A review mission by the International Monetary Fund applauds government’s fiscal strategy and above-average economic performance but warns of risks and challenges

The IMF has urged for more action to increase the supply of social housing
The IMF has urged for more action to increase the supply of social housing

Malta’s growth prospects remain favourable but mounting pressure on infrastructure, rapidly rising housing costs and labour shortages increasingly posed challenges, the International Monetary Fund said.

It also cautioned against the risks attached to new activities involving virtual financial assets and urged more action to increase the supply of social housing.

In preliminary findings following an official visit by IMF officials, the organisation applauded the government’s drive to improve infrastructure, increase the labour supply and ensure a surplus in public finances.

These efforts were key to sustain high growth levels, the IMF said in its findings released on Wednesday.

“Malta’s economic growth continues to be one of the strongest in Europe, resulting in rapid income convergence towards the EU average,” the IMF said.

However, while the outlook remained strong, the IMF said the economy faced capacity constraints.

Anti-money laundering action

In its recommendations, the IMF urged further reforms to remedy deficiencies in anti-money laundering legislation and called for the long-term independence of the Malta Financial Services Authority to be guaranteed.

The IMF warned that “the large and internationally connected financial and remote gaming sectors, the strong demand for the IIP and the envisaged expansion of blockchain-related activities create significant money laundering risks”.

To this end, the organisation recommended steps be taken to improve the understanding of risks and enhance their identification through “intrusive, risk-based supervision”. Timely and adequate sanctions should be applied in case of breaches.

Housing and labour gaps

The IMF also stressed that measures to make housing more affordable had to remain targeted towards low-income families and urged the government to step up efforts to provide social housing. 

The IMF urged the government to encourage further participation of women and elderly workers in the labour market to “support strong and inclusive growth”. Upskilling and reskilling of workers will also help address some of the problems companies faced.

The recent focus to upgrade the road infrastructure was deemed “appropriate” to alleviate traffic congestion and its impact on productivity and the environment.

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