2021 Index of Economic Freedom

Malta

OVERALL SCORE70.2
WORLD RANK36
Rule of Law

Property Rights68.2

Judicial Effectiveness57.3

Government Integrity55.0

Government Size

Tax Burden68.6

Government Spending60.9

Fiscal Health96.3

Regulatory Efficiency

Business Freedom67.6

Labor Freedom61.8

Monetary Freedom77.1

Open Markets

Trade Freedom84.0

Investment Freedom85.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.5 million
  • GDP (PPP):
    • $23.0 billion
    • 4.4% growth
    • 7.0% 5-year compound annual growth
    • $45,652 per capita
  • Unemployment:
    • 3.5%
  • Inflation (CPI):
    • 1.5%
  • FDI Inflow:
    • $3.6 billion

Malta’s economic freedom score is 70.2, making its economy the 36th freest in the 2021 Index. Its overall score has increased by 0.7 point, primarily because of an improvement in judicial effectiveness. Malta is ranked 21st among 45 countries in the Europe region, and its overall score is above the regional and world averages.

Malta’s economy has crossed the threshold into the ranks of the mostly free. To sustain that progress, the government will need to fight corruption more aggressively, further reform the labor code and the judicial system, and prioritize spending cuts and pension and health care reform, as entitlements continue to pressure public finances.

IMPACT OF COVID-19: As of December 1, 2020, 141 deaths had been attributed to the pandemic in Malta, and the economy was forecast to contract by 7.9 percent for the year.

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Background

Malta joined the European Union in 2004 and the eurozone in 2008. Prime Minister Robert Abela of the center-left Labour Party took office in January following the resignation of his predecessor, Joseph Muscat, after months of protests occasioned by Muscat’s handling of questions about the murder of an investigative journalist. With few natural resources, the tiny island nation imports most of its food, most of its fresh water, and all of its energy. The government maintains a sprawling socialist bureaucracy that oversees heavy entitlement spending. The economy depends on tourism, trade, and manufacturing. Well-trained workers, low labor costs, and EU membership attract foreign investment. Challenges include substantial immigration from politically unstable North African neighbors.

Rule of LawView Methodology

Property Rights 68.2 Create a Graph using this measurement

Judicial Effectiveness 57.3 Create a Graph using this measurement

Government Integrity 55.0 Create a Graph using this measurement

Property rights are protected, and expropriation is unlikely, but foreigners do not have full rights to buy property. The judiciary is independent both constitutionally and in practice. Public-sector corruption, including bribery of public officials, is not a significant problem. The investigation into the 2017 murder of anticorruption journalist Daphne Caruana Galizia continued in 2020.

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 26.2 percent of total domestic income. Government spending has amounted to 36.1 percent of total output (GDP) over the past three years, and budget surpluses have averaged 2.2 percent of GDP. Public debt is equivalent to 42.8 percent of GDP.

Regulatory EfficiencyView Methodology

Implementing an online one-stop shop for a variety of business registration and tax requirements and increasing the reliability of the power supply were not enough to keep Malta from losing business freedom points when compared to other countries. Labor costs are relatively low. Subsidies in the government’s 2020 budget amounted to 1.2 percent of GDP.

Open MarketsView Methodology

As a member of the EU, Malta has 45 preferential trade agreements in force. The trade-weighted average tariff rate (common among EU members) is 3 percent, with 639 EU-mandated nontariff measures in force. The financial market is small but sound and has become more open to competition. Over 90 percent of adult Maltese have access to an account with a formal banking institution.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Switzerland81.9-0.1
2Ireland81.40.5
3United Kingdom78.4-0.9
4Estonia78.20.5
5Denmark77.8-0.5
6Iceland77.40.3
7Georgia77.20.1
8Lithuania76.90.2
9Netherlands76.8-0.2
10Finland76.10.4
11Luxembourg760.2
12Sweden74.7-0.2
13Austria73.90.6
14Czech Republic73.8-1.0
15Norway73.40.0
16Germany72.5-1.0
17Latvia72.30.4
18Armenia71.91.3
19Cyprus71.41.3
20Bulgaria70.40.2
21Malta70.20.7
22Belgium70.11.2
23Azerbaijan70.10.8
24Spain69.93.0
25Poland69.70.6
26Romania69.5-0.2
27North Macedonia68.6-0.9
28Slovenia68.30.5
29Portugal67.50.5
30Serbia 67.21.2
31Hungary67.20.8
32Kosovo66.5-0.9
33Slovak Republic66.3-0.5
34France65.7-0.3
35Albania65.2-1.7
36Italy64.91.1
37Turkey64-0.4
38Croatia63.61.4
39Montenegro63.41.9
40Bosnia and Herzegovina62.90.3
41Moldova62.50.5
42Russia61.50.5
43Belarus61-0.7
44Greece60.91.0
45Ukraine56.21.3
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