Skill shortages in Malta have become very pronounced, with over 30% of companies reporting such a shortage.
This was a significantly higher share than in previous years, a European Commission document on Malta, published today says.
The report states that the rate of early school leavers in Malta remained very high and had not improved much compared to the previous year.
It says that Malta’s key challenges in the context of robust economic growth, mostly concerned its longer term sustainability. Growth prospects looked favourable and the fiscal outlook remained positive, on the back of a significant current account surplus.
Yet, the mounting pressure on infrastructure and natural resources, rising housing prices, as well as shortages of labour and skills might create challenges in the future.
Reducing the infrastructure gap, improving labour supply, strengthening the business environment and promoting environmental sustainability remained key policy priorities to sustain long-term growth.
It said that enhanced supervision in the financial sector was an additional important factor to safeguard financial stability and preserve Malta’s attractiveness and good reputation as investment destination
The report acknowledges that real GDP growth was among the highest in the EU in recent years. It reached its peak in 2014-15, averaging 7.7%, driven also by a surge in investment related to one-off factors.
It noted that gross government debt dropped below 60% of GDP in 2016 and it was projected to continue falling.
However, it said that despite some progress, challenges concerning tax compliance remained and the corporate debt bias remained high.
On national targets under the Europe 2020 strategy, the report notes that while Malta made progress towards its target on employment, gaps remained with respect to the targets for reducing greenhouse gases, raising R&D expenditure, increasing renewable energy provision, improving energy efficiency, reducing early school leaving, increasing the tertiary education attainment, and reducing poverty.
The report notes that although Malta took to amend certain aspects of its tax system that may facilitate aggressive tax planning, its tax rules may still be used in tax avoidance structures and ensuring effective financial supervision remained a challenge.
On the justice system, the report notes that this continues to face challenges concerning its efficiency. The fragmented landscape of anti-corruption institutions and the lack of formalised institutional coordination might hamper effective investigation and prosecution of corruption allegations.
The road transport sector also faced major infrastructure and sustainability challenges.
Severe traffic congestion constituted a barrier to investment, and generates significant external costs and greenhouse gas emissions.
In a statement, the government welcomed the report and said it remained committed to continue implementing its mandate to build a better future for families and businesses in Malta.