2013 Index of Economic Freedom

Malta

overall score67.5
world rank47
Rule of Law

Property Rights75.0

Freedom From Corruption56.0

Limited Government

Government Spending44.1

Fiscal Freedom61.2

Regulatory Efficiency

Business Freedom61.1

Labor Freedom65.4

Monetary Freedom80.4

Open Markets

Trade Freedom86.8

Investment Freedom85.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.4 million
  • GDP (PPP):
    • $10.8 billion
    • 2.1% growth
    • 2.0% 5-year compound annual growth
    • $25,428 per capita
  • Unemployment:
    • 6.4%
  • Inflation (CPI):
    • 2.4%
  • FDI Inflow:
    • $538.5 million
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Malta’s economic freedom score is 67.5, making its economy the 47th freest in the 2013 Index. Its overall score is 0.5 point higher than last year, with significant improvements in investment freedom, labor freedom, and property rights outweighing declines in business freedom and fiscal freedom. Malta ranks 23rd out of 43 countries in the Europe region, and its overall score is above the regional average.

Malta has continued to perform well since 2010, despite considerable economic and financial turbulence in the region. Openness to global trade and investment has contributed strongly to restoring economic growth. Malta has taken steps to enhance the competitiveness and soundness of a financial sector that is now about eight times the size of the economy. The banking sector has weathered the European sovereign debt turmoil relatively well with no need for capital injections.

Despite progress made in recent years, the foundations of economic freedom are only average by European standards, undermining prospects for more dynamic long-term economic expansion. The court system, while transparent and relatively free of corruption, remains inefficient. The government continues to intrude excessively into economic activity, imposing heavy tax burdens and maintaining high levels of spending.

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Background

The Nationalist Party government of Prime Minister Lawrence Gonzi, with a one-vote majority in parliament, has been challenged by soaring numbers of immigrants fleeing the 2011–2012 political uprisings in North Africa. Malta remained neutral during the 2011 NATO intervention in Libya. It joined the European Union in 2004 and the eurozone in 2008. Malta has very few natural resources and imports most of its food and fresh water and 100 percent of its energy supply. 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, with the majority of government spending allocated to housing, education, and health care.

Rule of LawView Methodology

Property Rights 75.0 Create a Graph using this measurement

Freedom From Corruption 56.0 Create a Graph using this measurement

Malta’s judiciary is independent both constitutionally and in practice. Property rights are protected, and expropriation is unlikely. Foreigners do not have full rights to buy property in Malta unless they obtain Maltese nationality. The country still lacks a comprehensive strategy for rooting out corruption as well as appropriate institutions to implement and monitor anti-corruption activities.

Limited GovernmentView Methodology

The top income and corporate tax rates are 35 percent. Other taxes include a value-added tax (VAT) and a capital gains tax. The overall tax burden equals 37.8 percent of total domestic income. Despite some reduction in spending, government expenditures remain high at a level equivalent to 43.2 percent of total domestic output. Public debt, at about 70 percent of GDP, has crept into potentially dangerous territory.

Regulatory EfficiencyView Methodology

The overall regulatory framework remains burdensome despite reform efforts. Starting a business takes 40 days on average, and completing licensing requirements costs over twice the level of average annual income. The labor market remains relatively rigid. The government mandates a minimum wage, and labor relations can be confrontational. With inflation under control, monetary stability has been maintained.

Open MarketsView Methodology

Malta’s trade regime is the same as that of other members of the European Union, with the common EU trade-weighted average tariff rate standing at 1.6 percent, but non-tariff barriers raise the cost of trade. Foreign investment is welcome, and investment regulations are generally transparent. The financial sector has undergone gradual restructuring and expansion, and the banking sector has become more open to foreign banks.

Country's Score Over Time

Bar Graph of Malta Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Malta to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81-0.1
2Denmark76.1-0.1
3Ireland75.7-1.2
4Estonia75.32.1
5United Kingdom74.80.7
6Luxembourg74.2-0.3
7Finland741.7
8The Netherlands73.50.2
9Sweden72.91.2
10Germany72.81.8
11Georgia72.22.8
12Lithuania72.10.6
13Iceland72.11.2
14Austria71.81.5
15Czech Republic70.91.0
16Norway70.51.7
17Armenia69.40.6
18Belgium69.20.2
19Cyprus69-2.8
20Slovakia68.71.7
21Macedonia68.2-0.3
22Spain68-1.1
23Malta67.50.5
24Hungary 67.30.2
25Latvia66.51.3
26Poland661.8
27Albania65.20.1
28Romania65.10.7
29Bulgaria650.3
30France64.10.9
31Portugal63.10.1
32Turkey62.90.4
33Montenegro62.60.1
34Slovenia61.7-1.2
35Croatia61.30.4
36Italy60.61.8
37Serbia 58.60.6
38Bosnia and Herzegovina57.30.0
39Moldova55.51.1
40Greece55.40.0
41Russia51.10.6
42Belarus48-1.0
43Ukraine46.30.2
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