2018 Index of Economic Freedom

Malta

overall score68.5
world rank46
Rule of Law

Property Rights68.1

Government Integrity49.9

Judicial Effectiveness62.8

Government Size

Government Spending51.0

Tax Burden64.7

Fiscal Health90.0

Regulatory Efficiency

Business Freedom64.0

Labor Freedom61.1

Monetary Freedom78.8

Open Markets

Trade Freedom86.9

Investment Freedom85.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.4 million
  • GDP (PPP):
    • $17.3 billion
    • 6.3% growth
    • 5.6% 5-year compound annual growth
    • $39,834 per capita
  • Unemployment:
    • 5.3%
  • Inflation (CPI):
    • 0.9%
  • FDI Inflow:
    • $3.6 billion
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Malta’s economic freedom score is 68.5, making its economy the 46th freest in the 2018 Index. Its overall score has increased by 0.8 point, with improved scores for the government spending and fiscal health indicators exceeding declines in monetary freedom and government integrity. Malta is ranked 22nd among 44 countries in the Europe region, and its overall score is below the regional average but above the world average.

Malta’s market-oriented economy, the smallest in the eurozone, relies heavily on trade with Europe. Malta survived the eurozone crisis because of low debt and sound banking. The judiciary, fairly independent and efficient, provides strong protection of property rights. Malta is weak in several areas of economic freedom, however, with high tax rates and high levels of government spending. Corruption and rigid labor laws add to business costs. The rapid growth of the online gaming sector has increased criminal money-laundering activity.

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Background

Malta joined the European Union in 2004 and the eurozone in 2008. Joseph Muscat of the Labour Party has been prime minister since 2013. Despite allegations of corruption concerning Muscat’s wife, the Labour Party won an absolute majority in June 2017 snap elections. 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 EU membership attract foreign investment. The government maintains a sprawling socialist bureaucracy that oversees heavy entitlement spending, but the unemployment rate is one of the EU’s lowest, and growth is strong. Substantial migration from North Africa and regional instability are growing concerns.

Rule of LawView Methodology

Property Rights 68.1 Create a Graph using this measurement

Government Integrity 49.9 Create a Graph using this measurement

Judicial Effectiveness 62.8 Create a Graph using this measurement

Expropriation is unlikely, and property rights, both real and intellectual, are protected. Foreigners do not have full rights to buy property in Malta. The judiciary is independent. Malta’s politics is deeply polarized, and repeated allegations of corruption pose risks for government stability. A journalist who reported allegations of corruption against the prime minister’s wife and two government officials was killed in October 2017 by a car bomb.

Government SizeView Methodology

The top individual income and corporate tax rates are 35 percent. Other taxes include value-added and capital gains taxes. The overall tax burden equals 32.8 percent of total domestic income. Over the past three years, government spending has amounted to 40.4 percent of total output (GDP), and budget deficits have averaged 1.3 percent of GDP. Public debt is equivalent to 59.4 percent of GDP.

Regulatory EfficiencyView Methodology

Malta has simplified the process of starting a business by reducing the time needed to register a company. Labor regulations are relatively rigid, and there is a minimum wage. The government has increased rent subsidies and funneled aid to the money-losing state-owned airline.

Open MarketsView Methodology

Trade is extremely important to Malta’s economy; the combined value of exports and imports equals 271 percent of GDP. The average applied tariff rate is 1.6 percent. Nontariff barriers impede some trade. In general, government policies do not significantly interfere with foreign investment. 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

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Regional Ranking

rank country overall change
1Switzerland81.70.2
2Ireland80.43.7
3Estonia78.8-0.3
4United Kingdom781.6
5Iceland772.6
6Denmark76.61.5
7Luxembourg76.40.5
8Sweden76.31.4
9Georgia76.20.2
10Netherlands76.20.4
11Lithuania75.3-0.5
12Norway74.30.3
13Czech Republic74.20.9
14Germany74.20.4
15Finland74.10.1
16Latvia73.6-1.2
17Austria71.8-0.5
18Macedonia71.30.6
19Romania69.4-0.3
20Armenia68.7-1.6
21Poland68.50.2
22Malta68.50.8
23Bulgaria68.30.4
24Cyprus67.8-0.1
25Belgium67.5-0.3
26Hungary 66.70.9
27Kosovo66.6-1.3
28Turkey65.40.2
29Slovakia65.3-0.4
30Spain65.11.5
31Slovenia64.85.6
32Albania64.50.1
33Montenegro64.32.3
34France63.90.6
35Portugal63.40.8
36Italy62.50.0
37Serbia 62.53.6
38Bosnia and Herzegovina61.41.2
39Croatia611.6
40Moldova58.40.4
41Russia58.21.1
42Belarus58.1-0.5
43Greece57.32.3
44Ukraine51.93.8
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