IMF Malta 2024 Article IV Consultation Staff Report

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RIF Trust on the International Monetary Fund and Malta

RIF Trust’s Maltese Residency and Citizenship by Investment expert is Shukri Harfoush. He keeps his eyes out for all Malta-related news such as the latest IMF Malta report.

Our Maltese RCBI specialist insists: “Every positive word you read about Malta makes the €100,000 Residency by Investment program, the Malta Permanent Residence Programme (MPRP), look even more of a bargain.”

“Similarly, Malta’s €600,000 Citizenship by Investment program, Maltese Exceptional Investor Naturalization (MEIN) becomes even more alluring.”

Shukri concludes: “The International Monetary Fund is a world-renowned association. When they talk; the world should listen.”

The IMF Malta 2024 Article IV Consultation Staff Report Basics

We gave you a preview of the report when we published Malta Economy Growth to Continue Says IMF on Friday, November 29, 2024. As expected, this IMF Malta report is broadly positive. It begins with a breakdown of the key issues.

The context section makes for interesting reading. We learn that “Malta has experienced strong growth over the past decade, primarily driven by export-oriented service industries, such as tourism and online gaming. Although growth is expected to moderate, it will remain among Europe’s highest in the near term, along with tight labor markets.”

This section emphasizes the Maltese economy’s strength in bouncing back. The IMF Malta report commends a financial system that “has demonstrated resilience amid successive shocks.”

The Past, Present, and Future of Maltese Economic Growth

Malta is one of Europe’s recent economic success stories. From 2014 to 2023, growth averaged 6.75%, Europe’s second-highest rate. This meant that by 2023 Malta’s GDP per capital matched the EU average.

The IMF report praises the Maltese government for being proactive. Encouraging the development of online gaming and tourism has helped to substantially rewrite GDP and balance of payments data. This has led to “a stronger growth and external sector performance over the past four years, with a more favorable fiscal position than previously estimated.”

There is some caution expressed by the International Monetary Fund about Malta’s ability to balance economic growth with environmental and social sustainability. Incoming foreign workers and tourists boost the economy but also put a strain on infrastructure and public services. Also, Malta “faces a structural labor shortage and mismatches and the challenge of advancing the green transition.”

The IMF welcomes the political stability of Malta. The Labor Party has a clear majority in parliament. This ensures that “Malta’s policy direction has aligned broadly with past staff recommendations.”

Economic Outlook and Risks in Malta

This latest IMF Malta report predicts growth to slow in the country. 7.5% output growth in 2023 became 5% in 2024 and is tipped to be 4% in 2025. Nevertheless, this rate will ensure Malta remains one of Europe’s bigger achievers.

The tourism sector “should continue to grow robustly, given expanded flight capacity and increased tourism arrivals in the winter season. Non-tourism exports will likely be supported by a modest recovery in Europe.” The recovery of domestic demand is linked to private consumption and investment which remains stable.

The 4% growth is under the average achieved before Covid. But it is keeping up with global growth that has itself dipped post-pandemic. “A more targeted immigration policy” may affect growth in labor-intensive tourism.

The Maltese Government Perspective

The International Monetary Found report that “authorities broadly agreed with staff on the outlook.” There is confidence about the Maltese economy continuing to move onwards and upwards. They concede, like the IMF, that pace will slow on this front.

In addition, “wage pressures are contained, partly due to the influx of foreign workers, with inflation stabilizing at around 2 percent by mid-2025.” Yet, they expect medium-term growth to taper with the decrease in net migration inflow. Geopolitical developments leading to a rise in commodity prices represents a downside risk whilst on the upside, commitment to gaming and tourism will strengthen exports.

The European Union has new fiscal rules and Malta is abiding by them. As the IMF Malta report reveals, “The Ministry of Finance (MOF) was confident in reducing the overall deficit from 4 percent of GDP in 2024 to 2.6 percent of GDP by 2027 while keeping public debt below 50 percent of GDP over the medium term.” MOF reiterated their pledge to uphold a fixed-energy price policy to stabilize the economy.

Malta’s Ministry of Finance consider revenue administration reform should take precedence over corporate income tax (CIT) reform. The 90% personal income tax (PIT) returns is a direct result of improved revenue administration leading to more effective tax compliance. Nevertheless,  “following progress in revenue administration reform, they will focus on CIT reform in line with the EU’s Directive on OECD Pillar II, pending clarification of QRTC rules from the EC .”

The Maltese government has no concerns regarding the resilience of the financial system. With healthy capital and liquidity, Maltese banks are in prime condition. The authorities concede that they need to be watchful with cybersecurity and real estate.

Finally, “the authorities are planning to tighten macroprudential policies further. They indicated that credit growth was predominantly driven by real estate, while growth in other corporate sectors remained moderate. They viewed adjusting the sectoral systemic risk buffer (sSyRB), rather than the countercyclical capital buffer, as the optimal policy response.”

Selecting Between New Residency and Second Citizenship in Malta

Malta is unique in offering both Residency and Citizenship by Investment. If your biggest issue is European mobility to grow your business and improve family vacations, MPRP is probably what you’re looking for. That way, you and your dependents can travel freely across the 29 countries making up the Schengen Area.

The downside of the Malta Permanent Residence Programme is that it doesn’t provide a route to citizenship guaranteed by the Greek, Portuguese, and Spanish Golden Visas. Yet there’s no other direct European Citizenship by Investment other than MEIN. This sees you qualify for a coveted Maltese passport.

So, contact us now and we’ll be able to assess whether MEIN or MPRP is right for you. At this consultation stage, we can examine your specific needs. Once we’ve talked, we will be able to offer advice of the tailormade variety so that you can reap the benefits as soon as possible.