The 6.3 per cent real economic growth registered in 2015 exceeded all expectations. This jump in economic growth, which is higher both when compared to that of the previous year as well as the growth registered across the EU, has been building on the momentum set up in previous years, which accounted for an annual average growth of 3.5 per cent between 2012 and 2014. The main concern at this point is whether such exuberant growth is sustainable or otherwise.
Economies go through cyclical fluctuations, reflecting an alternation between periods of excessive optimism and pessimism affecting expenditure and consequently, economic growth. In line with this, it is pertinent to question the future of the Maltese economy on whether it is currently subject to an irrational exuberance boom, destined to taper off under the constraints of the productivity of its resources or on whether growth can be reasonably expected to be sustained and sustainable over the long term.
The current macroeconomic indicators depict a positive scenario with a strong economic basis for future growth. This is in line with a declining deficit and debt ratios, a strong external current surplus and a declining unemployment rate – all of which without translating in an excessive increase in inflation.
This still leaves us questioning whether there is enough investment to maintain economic growth. This essentially depends on the quantity and quality of investment being undertaken. At present, investment is at approximately 20 per cent of GDP, which is quite significant.
But it may now perhaps be time for Malta to focus more on the nature and quality of investment, in particular on human, environmental and social capital. Selected investment should first and foremost be less prone to economic, regulatory and operational risks. It should increase business activity by generating higher income leading to job creation and new opportunities. Moreover, it should be able to render businesses more competitive for internationalisation by making the best use of the scarce resource available and focus on yet unexploited resources while promoting environmental and social development.
One possible way to attract this type of investment is for Malta to push forward its lifestyle proposition. It can attract all types of businesses by promoting its lifestyle. Malta is not just a beautiful face in the middle of the Mediterranean Sea, and offers more than just a strong economy to investors. It is a safe country with rich historical and cultural background and at the same time it is able to provide vast options for leisure and a good social life. Moreover, its strategic geographical position makes connectivity easier, and for an island like Malta, accessibility is key to attracting tourism and foreign investment.
Promoting these characteristics will increase business in Malta, making all kinds of tourists want to visit and reside here – from foreign workers to students to high-end tourists. This business will enable Malta to focus on niche areas which are as yet unexplored, like medical tourism. Tourism has increased substantially over these couple of years, however, this could be attributed to problems in other countries. It is good that Malta has managed to maintain stability, attracting more tourists and consequently generating more business, but we need to move beyond this and instead of leaving our fate at the mercy of external circumstances, we should make the most of Malta’s current stability and lifestyle.
Malta has a lot to offer in this regard. The quality of life offered by the Maltese Islands should be given more importance. This will attract people from other countries, and with them comes more business and with more business comes more investment in different sectors of the economy. This is an opportunity to sustain current growth instead of losing it due to unwise investment decisions. As such, this addiction to growth coming from years of registered growth can be sustained through selected investment which should above all focus specifically on projects with the appropriate characteristics to effectively generate sustainable growth over the long run.