Malta - Overview of economy

Malta has few natural resources. Most of its foodstuffs (almost 80 percent) must be imported, as must its energy needs. Its economy is based on the export of manufactured products and tourism. The majority of Malta's trade is with the European Union (EU). Malta has applied for membership in the EU and can expect to be among the next nations to join the trade organization in 2003-05. The government has based most of its future economic policies on EU membership. Trade between Malta and the United States rose substantially during the 1990s. For some time, Malta has had a trade deficit , which has increased steadily over the past decade.

Maltese wages are low when compared to other European nations. In 1998 the average annual wage was equal to US$18,620, but inflation has traditionally been low (1.9 percent in 1999), allowing workers to enjoy a fair to high standard of living. Unemployment has stood at about 5 percent for the past 5 years, while gross domestic product (GDP) rose steadily through the 1990s, increasing by 4 percent in 1999.

However, the nation's debt increased dramatically in the 1990s as the government began a series of large infrastructure programs. In 1999 debt was 56.1 percent of GDP, or US$765 million. This was an increase from 33 percent of GDP in 1994. Because of the government programs, the construction industry has become a major economic sector in Malta. Partly in an attempt to lessen the debt and partly to improve the country's competitiveness, the government has begun a large-scale program to privatize state-owned businesses. Now the government is responsible for about half of Malta's GDP and actively pursues outside investment, offering foreign firms full ownership of commercial enterprises. Because wages are substantially lower than those of most EU countries, foreign firms have begun relocating to the islands. This is especially true of companies that produce footwear and clothing. Foreign investment now accounts for 50 percent of all new investment in Malta.

Tourism is the mainstay of the Maltese economy, but manufacturing and financial services are the fastest growing economic segments. Ship repair and support is the country's main industrial sector, but there is also a growing electronics sector. Agriculture remains only a small fraction of the economy.