2019 Index of Economic Freedom

Malta

overall score68.6
world rank41
Rule of Law

Property Rights69.8

Government Integrity50.3

Judicial Effectiveness50.4

Government Size

Government Spending56.1

Tax Burden64.2

Fiscal Health94.5

Regulatory Efficiency

Business Freedom67.1

Labor Freedom61.3

Monetary Freedom78.2

Open Markets

Trade Freedom86.0

Investment Freedom85.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.5 million
  • GDP (PPP):
    • $19.3 billion
    • 6.6% growth
    • 6.9% 5-year compound annual growth
    • $41,945 per capita
  • Unemployment:
    • 4.0%
  • Inflation (CPI):
    • 1.3%
  • FDI Inflow:
    • $3.2 billion

Malta’s economic freedom score is 68.6, making its economy the 41st freest in the 2019 Index. Its overall score has increased by 0.1 point, with higher scores on government spending and fiscal health countering a sharp drop in judicial effectiveness. Malta is ranked 20th among 44 countries in the Europe region, and its overall score exactly matches the regional average and is above the world average.

Malta survived the eurozone crisis because of low debt and sound banking but faces unsustainable costs of entitlements promised to an aging population. The country’s small, market-oriented economy relies heavily on trade with Europe. 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. Rapid growth of online gaming 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 has been prime minister since 2013, and his center-left Labour Party won an absolute majority in 2017 snap elections. With few natural resources, the tiny island nation imports most of its food and fresh water and 100 percent of its energy. The government maintains a sprawling socialist bureaucracy that oversees heavy entitlement spending, but Malta’s unemployment rate is one of the European Union’s lowest, and its growth rate is among the EU’s strongest. The economy depends on tourism, trade, and manufacturing. Well-trained workers, low labor costs, and EU membership attract foreign investment. Challenges include substantial immigration flows from politically unstable North African neighbors.

Rule of LawView Methodology

Property Rights 69.8 Create a Graph using this measurement

Government Integrity 50.3 Create a Graph using this measurement

Judicial Effectiveness 50.4 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. Corrupt officials have been prosecuted, but the government does not make information about such cases public. Authorities have taken control of Pilatus Bank, which is at the center of a scandal exposed by a journalist who was later murdered.

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 33.6 percent of total domestic income. Over the past three years, government spending has amounted to 38.3 percent of the country’s output (GDP), and budget surpluses have averaged 0.6 percent of GDP. Public debt is equivalent to 52.6 percent of GDP.

Regulatory EfficiencyView Methodology

Existing regulations are relatively straightforward and applied uniformly most of the time. Transparent and effective regulations have been adopted to foster competition, and the time required for registering a new business has been reduced. Labor regulations are relatively rigid, and there is a minimum wage. The government plans to subsidize solar plants and purchases of hybrid cars to meet green-energy goals.

Open MarketsView Methodology

The combined value of exports and imports is equal to 261.5 percent of GDP. The average applied tariff rate is 2.0 percent. Malta implements a number of EU-directed nontariff trade barriers including technical and product-specific regulations, subsidies, and quotas. The financial market is small but sound and has become more open to competition. About 97 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
1Switzerland81.90.2
2Ireland80.50.1
3United Kingdom78.90.9
4Iceland77.10.1
5Netherlands76.80.6
6Denmark76.70.1
7Estonia76.6-2.2
8Georgia75.9-0.3
9Luxembourg75.9-0.5
10Sweden75.2-1.1
11Finland74.90.8
12Lithuania74.2-1.1
13Czech Republic73.7-0.5
14Germany73.5-0.7
15Norway73-1.3
16Austria720.2
17Macedonia71.1-0.2
18Latvia70.4-3.2
19Bulgaria690.7
20Malta68.60.1
21Romania68.6-0.8
22Cyprus68.10.3
23Poland67.8-0.7
24Armenia67.7-1.0
25Belgium67.3-0.2
26Kosovo670.4
27Albania66.52.0
28Spain65.70.6
29Slovenia65.50.7
30Portugal65.31.9
31Hungary 65-1.7
32Slovakia65-0.3
33Turkey64.6-0.8
34Serbia 63.91.4
35France63.8-0.1
36Italy62.2-0.3
37Bosnia and Herzegovina61.90.5
38Croatia61.40.4
39Montenegro60.5-3.8
40Moldova59.10.7
41Russia58.90.7
42Belarus57.9-0.2
43Greece57.70.4
44Ukraine52.30.4
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