2017 Index of Economic Freedom

Malta

overall score67.7
world rank50
Rule of Law

Property Rights67.7

Government Integrity53.6

Judicial Effectiveness62.9

Government Size

Government Spending44.9

Tax Burden62.8

Fiscal Health85.1

Regulatory Efficiency

Business Freedom62.5

Labor Freedom57.2

Monetary Freedom83.5

Open Markets

Trade Freedom87.0

Investment Freedom85.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.4 million
  • GDP (PPP):
    • $15.5 billion
    • 6.3% growth
    • 3.8% 5-year compound annual growth
    • $36,005 per capita
  • Unemployment:
    • 5.4%
  • Inflation (CPI):
    • 1.2%
  • FDI Inflow:
    • $9.5 billion
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Malta’s overall entrepreneurial environment supports the development of a dynamic private sector. The judiciary, fairly independent and efficient, provides strong protection of property rights. The financial market is small but sound and has become more open to competition. The financial sector has weathered the global financial crisis relatively well.

Despite notable institutional competitiveness, Malta is weak in several areas of economic freedom. Tax rates and government spending, for example, are relatively high. Lingering corruption and rigid labor regulations add to the cost of doing business. The maintenance of fiscal health will require reasonable containment of the wage bill, social transfers, and pension funds.

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Background

Malta joined the European Union in 2004 and the eurozone in 2008. Labour Party leader Joseph Muscat won the March 2013 elections and became prime minister. With few natural resources, Malta imports most of its food and fresh water and 100 percent of its energy. The economy depends on tourism, trade, and manufacturing. Well-trained workers, low labor costs, and membership in the EU attract foreign investment, but the government maintains a sprawling socialist bureaucracy, and the majority of spending is allocated to housing, education, and health care. The unemployment rate is one of the lowest in the EU. Substantial migration from North Africa and regional instability are growing concerns.

Rule of LawView Methodology

Property Rights 67.7 Create a Graph using this measurement

Government Integrity 53.6 Create a Graph using this measurement

Judicial Effectiveness 62.9 Create a Graph using this measurement

Property rights are protected in Malta, and expropriation is unlikely, but foreigners do not have full rights to buy property. The judiciary is independent both constitutionally and in practice. The police and the Permanent Commission Against Corruption are responsible for combating official corruption and have prosecuted cases, but they do not publish information about such cases.

Government SizeView Methodology

The top individual income and corporate tax rates are 35 percent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden equals 35.6 percent of total domestic income. Government spending has amounted to 42.8 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.0 percent of GDP. Public debt is equivalent to 64.0 percent of GDP.

Regulatory EfficiencyView Methodology

Existing regulations are relatively straightforward and applied uniformly most of the time. Transparent and effective policies and regulations have been adopted to foster competition. Labor regulations are relatively rigid, and there is a minimum wage. The government plans to reduce the fiscal deficit from around 2 percent of GDP in 2014 to almost zero by 2018, in part by reducing subsidies such as support for a state-owned airline.

Open MarketsView Methodology

Trade is extremely important to Malta’s economy; the value of exports and imports taken together equals 101 percent of GDP. The average applied tariff rate is 1.5 percent. In general, foreign investment is not screened by the government. Many state-owned enterprises have been privatized. Supervision and regulation of the financial sector have gradually become more transparent and effective. The stock exchange is small but active.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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