Marching forward with confidence
The Maltese economy has survived testing times. Tonio Fenech, Malta's minister of finance, the economy and investment, explains how the country is well placed within Europe to sustain growth in the coming year.
Despite being one of the smallest countries within the EU, Malta's open but diverse economy - based upon financial and other related services, tourism and higher value-added manufacturing activity - has proved not only to be a success in the good times but an anchor of stability in the more recent difficult times. Although dependent on the major European economies, with EU countries accounting for two-thirds of our exports and also providing the lion's share of our tourists, the level of recession in Malta in 2009 was half the European average - the country's economic growth was -2%. But while it would have been unrealistic to expect that we could escape the impact of the international recession, not all sectors were affected to the same extent, and a few, such as financial services, continued to grow, attracting international business and investment throughout 2009.
The damage could have been much greater. However, the measures we took to shore up our hardest hit industries of tourism and manufacturing proved successful in containing the extent of the slowdown, safeguarding jobs and encouraging further investment. Our 2010 budget reinforces these efforts, introducing targeted initiatives to boost investment throughout industry sectors and encourage job creation. We are now beginning to see improvements in our economic performance across all sectors. And, while we ended the year with negative growth of 1.9%, initial indications for the first months of 2010 are maintaining a positive trend.
It is clear from recent economic indicators that Malta is emerging as one of the least affected countries by recession in the EU, and one of the reasons for this is the sustained growth in our financial services sector. The finance industry has become one of Malta's most important economic generators, registering year-on-year growth of 30% between 2007 and 2008. In 2009 this sector grew by 22%.
Sound environment
Malta's resilience in the face of the international financial crisis served us well, as our banks came through the financial crisis relatively unscathed, and our banking system was lauded internationally for its conservative approach based on sound fundamental banking business. Indeed, an article in the February 2009 issue of The Banker highlighted the reasons for this success - essentially that Malta's closely monitored yet flexible regulatory framework offers the ideal environment for financial services operators to conduct their business with confidence.
Determination for success
Going forward, we are determined to continue building on this success in 2010 and the years to come. Our formula, combining stringent supervision with flexibility, innovation and a proactive approach in updating and modifying legislation to meet the needs of the industry, has proved successful, ensuring that we are ideally positioned to attract business such as international banking, captive insurance, investment funds and trust and fiduciary activity. Indeed, in 2009 about 100 new investment funds were registered, an increase of almost 25%. This acceleration is expected to continue through 2010, as more fund managers discover the advantages of setting up or re-domiciling to Malta. Furthermore, as we expand our international network of double taxation treaties and agreements, we are seeing an influx of financial institutions such as international banks and insurance companies seeking the advantages of EU passporting rights combined with the access to new markets that Malta offers.
Malta is a well diversified centre, with strong banking, insurance, investment funds and wealth management sectors, all of which are underpinned by universally praised EU-harmonised legislation and regulation, a highly advantageous EU and Organisation for Economic Co-operation and Development-approved tax regime, an accessible and flexible single regulator and a pool of highly trained, experienced professional services providers. Our commitment to the industry will continue to guide us as we go forward, and we are confident that Malta will continue to flourish as a global financial centre serving global business.
