[WATCH] Central Bank: worker up-skilling, infrastructural investment essential

Central Bank governor Mario Vella in Malta's economic outlook

Malta’s macroeconomic outlook remains positive, and Gross Domestic Product growth is expected to remain substantial in the coming years, however the increase in the country’s population will likely add additional stress on infrastructure. The sharp rise in foreign labour could also pose challenges, since such workers are more prone to leave the country, and might add an element of fluctuation on Malta’s potential output.

This emerged from the Central Bank’s 2017 Annual Report, presented today by the bank’s governor Mario Vella.

Vella said that Malta’s economic growth was primarily driven by an increase in the exports of goods and services, however accelerated growth would inevitably create some frictions, which are not only economic, but include social issues.

Aaron Grech, chief economist at the Central Bank, highlighted that foreign workers often came to Malta to acquire skills by way of a work experience, and many of them might leave the island after three years or so, no matter what their employers offered them to remain.

Creating a society which is able to maintain flexibility and dynamism was crucial, he said. Up-skilling the local workforce and investing in infrastructure in the coming years were also very important, he stressed.

“Some employers have to train and re-train new staff frequently, but we have to live with this,” he said, “Without migrants coming to work here, our economy cannot grow. We only have 2,000 people out of work, and although there is still a pool of local women who haven’t entered the labour market, there is otherwise very little potential for labour growth locally left.”

Grech said GDP growth was expected to remain strong in the next few years, with more than 6% growth this year, followed by a gradual deceleration to 5% in 2019 and 4% in 2020.

“These remain much stronger than the medium term growth rates we had predicted, so the deceleration will be to a much higher ‘new normal’,” Grech said.

Economic participation constraints, in the form of the substantial labour shortages which firms are facing, leading to a moderation in businesses' rate of growth, is behind the deceleration, he emphasised.

Central Bank unable to comment on Pilatus saga

Asked about possible repercussions on Malta's banking sector following the arrest in the United States of Pilatus Bank's then chairman Ali Sadr Hasheminejad, governor Vella said he was unable to comment on individual banks, and directed us to the Malta Financial Services Authority instead.