New Report Highlights Key Role of Financial Services in Malta’s Economy
Commissioned by the Institute of Financial Services Practitioners, the Malta Institute of Accountants and the Malta Institute of Taxation, the report offers a critical snapshot of the industry
A new report outlines the significant contribution of Malta’s services sector to the national economy.
Jointly commissioned by the Institute of Financial Services Practitioners (IFSP), the Malta Institute of Accountants (MIA) and the Malta Institute of Taxation (MIT), leading economist Gordon Cordina from E-Cubed Consultants Ltd conducted the in-depth survey of the sector.
Sharing his early conclusions at the IFSP Annual Conference in April, Dr Cordina described his approach as covering a “wider perspective of policy and business behaviour, covering a range of services activities with common competitiveness concerns which include and extend beyond those normally associated with financial services.” Titled The Contribution of Export-Oriented Foreign Direct Investment in the Services (EFIS) Sector to the Maltese Economy, the report seeks to quantify the economic impact of export-oriented, foreign direct investment companies operating in the higher-value added services sector (EFIS). This sector, coined specifically for the purposes of the study, includes financial services as well as other services sectors.
Based on 2019 figures, the report highlights that the three main injections to Malta’s economy – namely exports, creation of productive assets and government expenditure or private consumption – together create a substantial demand for business activity and an economic value added of more than €12 billion. It goes on to outline that firms in the EFIS sector directly generated 19 per cent of the total value added to the Maltese economy.
In addition, the report shows that firms in the EFIS sector directly employed nearly 10 per cent of the total workforce in the Maltese economy during 2019 – equivalent to almost 22,200 people. The report also spotlights that the EFIS sector significantly boosts the nation’s productivity, with labour productivity in EFIS firms in 2019 estimated at 189 per cent of that of the average level of labour productivity across the economy.
While the growth of the EFIS sector exceeded that of the overall economy, helping to accelerate overall growth, it also made direct, indirect and induced contributions in terms of value-added and employment generation to the rest of Malta’s economy. Of the €3,036 million total value added generated by direct and indirect effects of the EFIS sector’s activity, firms outside the EFIS sector had a value-added of around €194 million and 4,700 jobs.
The report also records that firms in the EFIS sector have relatively low carbon and floorspace footprint in comparison to other sectors in Malta, while offering high salaries.
This report’s findings show that foreign-owned entities engaged in the export of services contribute significantly to Malta’s economic output, employment, government revenue, productivity and economic growth, whilst having a relatively low impact on the environment compared to other sectors of the economy. Furthermore, this study makes it possible to gauge the full extent of the EFIS sector’s significant contribution to Malta’s economy – and its importance as part of the nation’s economic future.
The report and its salient findings were presented to the Prime Minister the Hon Robert Abela and the Minister of Finance the Hon Clyde Caruana during a meeting held at Castile, and to the Leader of the Opposition the Hon Bernard Grech, accompanied by the Opposition Spokesperson for Finance the Hon Jerome Caruana Cilia and the Opposition Spokesperson for the Economy the Hon Ivan Bartolo.