Recalibrating the economic model

The latest MaltaToday survey has exposed a growing discontent with Malta’s economic model - a model heavily reliant on construction and a rapidly expanding foreign labour force. 

Although traditional concerns like jobs and inflation have taken a backseat, new anxieties are emerging. Chief among them is the rise in foreign workers, traffic congestion, excessive construction, and overpopulation. Together, these worries reflect deeper unease about the country’s economic direction and its impact on daily life. 

The current model, focused on high growth rates, has allowed the government to finance generous energy subsidies and social programmes, cushioning much of the population from economic shocks. However, with public frustrations mounting, the government faces a dilemma: Can it continue to sustain this growth while also addressing the growing social and environmental discontent? 

Labour has already pledged tax cuts amounting to €100 million, aimed primarily at the middle and lower-middle classes. Simultaneously, the administration has committed to curbing the influx of foreign workers. Yet, this promise comes with risks. Malta’s record growth over the past decade has been fueled by foreign labour; cutting this inflow could destabilise the very economic engine that sustains the state’s welfare model and upcoming tax reductions. The risk is clear: the country might struggle to maintain its social spending without triggering higher taxes elsewhere. 

What the survey makes clear is that concerns about foreign workers are not merely about job displacement or competition for resources. They are symptomatic of broader issues linked to rapid, unchecked growth - issues that are eroding the quality of life for many residents.

The focus on symbolic measures, such as reducing the number of food couriers or restricting the issuance of certain licences, will not address the root cause. Moreover, targeting smaller groups, like failed asylum seekers some of which have lived here for more than a decade, smacks more of political placation than meaningful reform. 

To address these concerns effectively, Labour will need to do more than just take symbolic action. A more fundamental recalibration of the economic model is required. This includes a serious commitment to enforcing regulations, tackling the shadow economy, and ensuring that all contributors to the economy are paying their fair share.

The government’s intensified focus on curbing tax evasion is a step in the right direction. Measures to prevent salaries from being paid in cash, as recently proposed, could further stem abuses - even if the impacts of such a measure on different stakeholders should be carefully considered.  If such a measure is imposed on employers, this would raise questions on whether professionals like doctors and lawyers should be allowed to accept cash payments considering that these are not even required to present a fiscal receipt. 

The question, however, is whether the government has the political will to sustain these efforts. The need for continued economic growth to finance tax cuts and infrastructure projects could ultimately undermine these initiatives. Without a broader overhaul, any short-term gains from curbing tax evasion or symbolic tweaks to the labour market will only offer temporary relief. 

Moreover, addressing growing concerns on traffic and the environment also requires public investment which would require greater spending. In short, the opportunity cost must also be considered when the government embarks on a major tax cut. 

With traffic emerging as the second most pressing concern, the government is now duty bound to present concrete plan of action, backed by budgetary allocations. It must get serious about considering a long-term programme to invest in a metro. 

Malta is at a crossroads. Labour’s ability to balance economic growth, public spending, and public sentiment will determine whether it can shift from an economy that merely grows to one that truly benefits its citizens. 

As UĦM CEO Josef Vella says in his interview with MaltaToday, the country needs a long-term economic plan with a clear direction. It is such a plan that will outline what policy measures are required in various fields and how these can be implemented. 

Just as the Active Labour Market Policy of 2012 identified several measures that encouraged more people to go out and work – from people on benefits who were encouraged to find employment to more women being enticed to seek productive jobs and the introduction of in-work benefits to boost incomes for low earners – thus ensuring the economic engine had all its pistons firing, the country needs a new strategy to address today’s problems linked to quality of life. 

Anything less, and these latest survey results may just be the beginning of a deeper crisis in public trust.