Malta’s ailing infrastructure in the wake of the population spike triggered by the influx of third country nationals is now starting to bite investment prospects, according to a reputable annual study.

The stern warning was sounded in the EY 2023 attractiveness report which over the last two decades has been highlighting the nation’s strongest and weakest  characteristics  while proposing  social and economic reforms to address the island’s most pressing issues. Surveying over 120 foreign direct investment companies with a direct stake in Malta’s economic development, the report highlights the issues that are impacting both foreign and domestic companies.

In its analysis the report notes that the existing strain on Malta’s infrastructure, intensified by continuous economic, workforce and tourism growth is immediately apparent. Concurrently, challenges in the labour market, marked by a demand for specialised talent amid low unemployment and increasing labour costs, further dent the island’s current attractiveness.

Furthermore, the report expressed disappointment that warnings sounded in recent years had not been heeded by the authorities, with the consequence that certain issues had become even more challenging. Some years back we poised a poignant question:  Where should Malta’s economic trajectory lead us?  In 2016, amid global shifts, we suggested encouragement of new economic niches, ensuring sustainable growth in sectors such as Fin Tech, e-commerce and commodity trading.

Subsequently in 2017, the report had questioned the type of economic growth Malta wanted to achieve, particularly the island’s carrying capacity and government’s population growth plans. Questions on  the need to steer the economy away from mass consumption and numbers and focus more on value added were again raised in 2020.

“Similar thoughts or views now appear to resonate with several stakeholders. In recent months we have heard calls from a number of quarters including government, the opposition, The Malta Chamber, industry groups, employer associations, trade unions and society all suggesting the need for an adjustment or change to the island’s economic model. A model that emphasizes substantial, tangible improvements in infrastructure, the labour market, and holistic economic sustainability beyond mere numerical growth.”

Concerns from overpopulation stem from the fact that in this study 88% of respondents consider Malta’s planning and preparedness for population growth in terms of infrastructure to be inadequate. On the other hand only 6%  are positive on this parameter and find it to be adequate. The state of the built environment and of the natural environment were chosen to be the most important with mass transportation in third place.

Another area which is a source of concern is the rising cost of living including housing. In this respect half of the respondents cited this aspect when asked to identify factors impacting the ability to recruit and retain talent from overseas. Other key aspects are the level of competitive salaries  available to individuals in the same sector and the ease-of-process and cost of bringing EU nationals to Malta.

While the report calls for adjustments in the economic model, it warns that this needs to be handled with care to avoid any shocks.