Malta: A Free-Market Success Story

By Dan Mitchell. 

"I’m in Malta for a bit of research before speeches in Amsterdam and Reykjavik as part of the Free Market Road Show. 

So today is a good opportunity for a column on Malta’s rather-successful economy (something I’ve done for other countries, such as Poland, Chile, Botswana, Singapore, and Estonia).

Let’s start by looking at Malta’s score from the latest edition of Economic Freedom of the World.

Malta is ranked #18, putting it easily in the top quartile.

It gets very good scores in every category other than fiscal policy (somewhat similar to Nordic nations).

What are some of the best features of Maltese economic policy? Let’s look at some excerpts from a column in The Business Picture by Nima Sanandaji.

"…while the big economies of Europe are stagnating, several of the smaller ones are outpacing the US. Malta is the best example, since it led the European growth league in 2024 with a five per cent growth. …Malta is succeeding thanks to competitive taxes and regulations, combined with talent supply, which make it a growing brain business jobs hub. …The share of adults employed in these jobs has increased substantially over time. Currently 9.5 per cent of adults in Malta are employed in highly knowledge intensive jobs. After Switzerland, Ireland and the Netherlands, this is the highest rate in Europe. …Large economies like Greece, Spain, Italy and France have due to regulatory and tax burdens stagnation in share of adults in knowledge intensive jobs. The same countries also struggle with economic growth and job creation."

I’m not surprised that Malta is growing faster than the United States. It’s a classic example of convergence.

What’s more interesting is to look at examples of divergence.

Here’s a chart, based on the Maddison database, showing Malta’s long-run performance (in red) compared to regional competitors, as well as a sampling of other nations.

 

"A few years after World War II ended, Malta was very poor. It ranked lower than Madagascar and its level of per-capita GDP was less than half of Greece.

Now it is has shot way past those two nations, as well as other countries that used to be richer.

Amazingly, Malta has almost caught up with Italy, which had nearly four times as much per-capita GDP back in 1950.

Does this mean Malta has perfect economic policy? Of course not. But it does have better economic policy than most other nations, especially its Mediterranean neighbors.

The moral of the story is that there’s a recipe for growth and Malta is doing a decent job of following the recipe. Assuming they want prosperity, other nations should do the same thing."