The man in the street regularly watches announcements on state TV about a healthy and resilient economy, boasting full employment, ushering a swift recovery in the tourist industry, now firing on all cylinders, all dancing to the tune of low unemployment levels. It sounds all hunky dory, as other European states continue to register high unemployment, and Germany, the biggest economy of EU is slowing down.
However, in Malta the sound bite from the plebs praise pennies from Heaven when rain cheques are donated by the State to all voters camouflaged as a reward for hard work. Following a robust economic growth of 6.9% in 2022 (compared with 2021, itself a lack lustre performance due to the pandemic), Government is projecting GDP to slow to 4.1% in real terms in 2026. Against this backdrop of superlative economic growth, the debt-to-GDP ratio is expected to amount less than the 60% threshold set by Maastricht rules as the Government decided to maintain its unprecedented energy support measures. In fact, the deficit for 2025 is expected to amount to 4.0% of GDP. Debt is expected to amount to €12.0bn in 2025 and reach €13.5bn by 2027.
Interest costs are expected to continue rising, reaching €390million by 2027, implying almost a doubling of annual national debt servicing requirements since 2023. Those at the European Central Bank and at the European Commission, which focus solely on their tunnel vision of a relative debt ceiling of 60 per cent of GDP as set by the Maastricht Treaty, did not bat an eye lid when presented with our national fiscal budgets for approval. The Government's debt-to-GDP ratio is set to increase from 49.5% in 2024 and 50.1% in 2025, so once Brussels is quiescent on our debt levels, then we may ask why is discussion on the relative increase in the poverty level (real or perceived), not on our top agenda?
Ideally, we sit down and take a more holistic approach to the incidence of poverty. The measure of poverty most relevant for policymakers and headlines, is the number of persons living below the income threshold that denotes that they are at risk of poverty. There were 92,690 people in Malta who were at risk of poverty in 2024, according to national data released on Monday. The data, extracted from the annual European Statistics on Income and Living Conditions conducted by the National Statistics Office, revealed that the number of people living in households with a national equivalised income below the at-risk-of-poverty line (€12,258) was 92,690 or 16.8 per cent of the target population.
Another topic which gathers attention is care for the environment. This is covered under the ESG rules - large companies now need to beef up their balance sheets in order to be ranked complaint once the ESG rules become mandatory. ISSA 5000 is a new regime recently introduced to serve as a comprehensive, stand-alone standard suitable for limited and reasonable sustainability assurance engagements. It will apply to sustainability information reported across any sustainability topic and prepared under multiple frameworks.
One of EY Malta Attractiveness Surveys found that a staggering 86% said they consider Malta's preparedness for future population growth to be inadequate, with only 6% saying they thought the country is up to the task. Despite these concerns, the country's attractiveness to foreign investors remain largely unchanged since last year, hovering at 59%, an increase of one percentage point from last year. Good to notice regulations published by Malta's government in September 2025 (Legal Notice 188 of 2025). These introduce a major shift such that certain entities and trusts can now elect a 15% final income tax, in lieu of the imputation system that has long characterised the country's corporate tax regime. One may overlook another plus. This refers to Malta's participation exemption regime that provides a full income tax exemption on dividends from a participating holding, (where a company directly owns at least 5% of the equity shares of a non-resident company or meets specific other conditions), and on capital gains from transferring part or all of a participating holding.
More good news follows, as Malta will apply the derogation with respect to the EU Minimum Tax Directive such that it will not apply the Income Inclusion Rule ('IIR') and Undertaxed Profits Rule ('UTPR') for up to 6 years. This imposes a flat tax of 15% on profits of multinationals having a group turnover of €750 million or higher.
A Qualified Domestic Minimum Top-up Tax ('QDMTT') is not expected to be introduced at this stage. The current corporate taxation system, known as the full imputation system will stay, whereby corporate profits are taxed at the rate of 35%, but which refunds up to 30% can be claimed. Malta plans to introduce in the form of grants or tax credits (QRTCs) in the context of future reforms.
Another headache not specifically mentioned in the budget, is the leakage of early school leavers (about 17%) who gain little formal education and naturally, still expect to earn a decent wage (not easy today when digitization and AI is de rigueur). Lobby groups complain that minimum wage is too low to sustain a breadwinner, unless they do three jobs on the hop.
As a counter measure, the Chamber of SME objects to further unsustainable increases in public expenditure resulting in millions of euros procured on direct orders. But it is not a walk in the park, as Malta's public finances deteriorated sharply in the first nine months of 2025, with the Consolidated Fund registering a deficit of €253.1 million compared to a surplus of €142.3 million a year earlier, according to figures released by the National Statistics Office.
Government. National debt reached €11.1 billion by September, up nearly 11% year-on-year. Despite the deterioration in public finances, yet finance Minister Clyde Caruana said the 2025 deficit should remain around 3.3% of GDP, slightly lower than last year, with Malta on track to exit the EU's Excessive Deficit Procedure by 2026.
Please raise your glasses to a curated growth trajectory.
George M Mangion is a Senior Partner at PKF Malta