[WATCH] Foreign workers must be catered for, if growth is to continue says Central Bank governor

Mario Vella said that despite the perception, Malta’s economic success does not rely solely on tax incentives 

Central Bank governor Mario Vella said Malta needed to continue to cater for foreign workers for the economy to keep growing
Central Bank governor Mario Vella said Malta needed to continue to cater for foreign workers for the economy to keep growing

Central Bank Governor Mario Vella said on Thursday that for Malta’s economic growth to continue, the country must cater for the continued influx of foreign workers. 

“It is clear that to have the continuity of such economic growth, the country must look to cater for such growth through the improvement of wages, infrastructure and accommodation for these workers,” Vella told the current affairs programme Xtra.

He continued by saying that if the country did not do so, the economy would start slipping backwards. 

Vella also elaborated on an analogy he used during an interview with MaltaToday last Sunday where he compared the country to an old car which is struggling to keep up with the speed of its economic acceleration.

“We have never seen such rapid growth and so we start lacking in some areas, especially given the way the economy is set up,” he said.

Asked whether Malta’s economic growth was only based on the financial services sector and Malta offering foreign companies lower tax rates, Vella said this was not the case.

“Looking at the economy in the last 50 years, one can say that Malta’s success relies on more than offering better tax incentives.” he said, adding that it would not “ignorant” to reduce the country’s success simply to fiscal benefits for foreign companies. In fact, he said Malta was lucky not to depend on one sector.  

Vella said that the companies and economic sectors that had come to Malta and stayed had seen and enjoyed the potential the country holds. He added however that despite the success, the economy must constantly try to reinvent itself.

“It is important to have the economy as diverse as possible, while keeping balance between the different sectors,” he said. 

Asked about the Central Bank’s conservative nature, Vella said his was inevitable given that it formed part of the European Central Bank. “Due to the bank’s competence within the euro system, we are forced to be conservative by nature.” The monetary politics of the central bank, he said, are formulated within the other euro system countries.

On whether criticism directed towards the low interest rates in Malta was justified, Vella pointed out that had the EU not adopted such a policy, it wouldn’t have recovered from the 2008 financial crisis.

Economist Gordon Cordina echoed Vella in saying that the country was going through an unprecedented level of economic growth and job creation resulting in a situation where not all areas of the economy were managing to keep up.

He said that along with economic growth, the country also needed to ensure workers rights as well as the environment, for example, were prioritised.

Asked if the country has a sustainable economic model, Cordina said it was one area where Malta could do better. 

“Let’s take the Gozo tunnel as an example, instead of looking at how we can leave Gozo to its distinctive state after the project, we are still stuck fighting over whether the project should be done or not,” he said. 

Cordina said that economic growth should be used environmental purposes, pointing out that this could in turn lead to further growth.

Vella agreed, saying that he agreed that the environment had monetary value.

“If we continue to grow at this rate, we require a trade-off with the environment,” he said. “You have to sacrifice, but that sacrifice must be calculated well, as we cannot end up losing our basic wellbeing.”

More in Xtra