02 Oct Malta’s COVID-19 response finds opportunity for a better future
When I launched AUM Asset Management in Malta, we knew we’d chosen a great region to do business. And over the years, the strength of Malta’s support for the business community has only reinforced this opinion.
And now that the world is deep in the midst of a global pandemic along with all of the economic challenges that brings, Malta is offering a strong support package.
Malta’s COVID-19 response at different stages of the pandemic
While immediate measures were taken by Maltese authorities to try and stem the tide of COVID-19, certain industry sectors have suffered more impact. This is the same everywhere around the world, with hospitality, retail, and travel among the hardest hit.
However, Malta’s Government was quick to work proactively and decisively to help individuals and businesses that have been heavily impacted. Key measures implemented by the Maltese Government total a package worth approximately €1.8bn. This package goes towards either direct financial support for businesses and individuals or indirect financial support.
To further contextualise this amount, the initial package is the equivalent of around 12% of the country’s GDP. Indirect financial support measures include paying VAT, national insurance and income tax on salaries and a programme of tax deferrals.
The Maltese Government has also implemented a basic wage supplement. Estimates show that 16,000 businesses and approximately 90,000 employees in Malta will directly benefit from these measures. The aim is to keep as many people in possible in full employment as we weather the pandemic.
Malta’s total financial support package the biggest in the world
Early Government measures ensured that unemployment levels remained fairly stable during the first months of the pandemic. The provision of financial support for those who have to quarantine and for parents who needed to deal with childcare issues were also included in the raft of measures.
And according to a study from Columbia University that was reported by the BBC, Malta’s financial package of COVID-19 support is the largest in the world. The research was led by Professor of Economics Cehyn Elgin, who analysed COVID-19 economic rescue packages from 166 countries. The results say that the Maltese Government’s response is the most significant and wide-ranging in the world. I mentioned earlier that initial measures are equivalent to 12% of Malta’s GDP, but since then the entire spending package has been calculated as worth almost a quarter (22%) of the country’s economy. This is significantly higher than the 5% package from the UK Government, 8.4% in Canada, 11% in Australia and 14% in the US.
A strong economy and low national debt allow these measures
Most business activity restarted in Malta by June, with the airport opening on 1 July. At this point, the Government announced a specific regeneration package – separate the financial support package. This is worth more than €900m and is based on a vision to not only help Malta recover from the impact of the pandemic, but also to attract new areas of business growth over the next year.
There are three main principles within the regeneration plan:
- Support domestic consumption.
- Provide direct support to industry and at the same time incentivise work.
- Reduce business costs and provision of liquidity.
How can Malta afford this financial support package? Because of judicial spending over the last few years. Malta is one of the very few countries that has registered budgetary surplus for four years in a row, while also reducing national debt to approximately 40% of GDP. This national debt is far below the European average.
How Malta will reset its economy
While many other countries are still initiating short term support plans, it’s important to recognise that Malta’s initiatives are to prepare its economy for the next generational development.
These measures are also in place to ensure that the country can grasp opportunities presented by COVID-19. Opportunities that the pandemic are offering to those countries strong enough to take them up include the acceleration of total digital transformation, the embrace of Fintech, Insurtech, cryptocurrency, AI and automation. There is also the opportunity to reset business processes to ensure a more sustainable future and cleaner environment.
Businesses are being encouraged by the Government to reskill their employees, implement on-the-job training and re-engineer their processes. The European Commission have welcomed Malta’s measures and called for investment to further support the country’s digital and environmental transition. Here are the Government’s plans:
- Substantially invest in new industrial infrastructure. The intention of this is to attract new investment in emerging and existing sectors.
- Financially support local businesses to develop their export markets. For example, businesses that had been planning to take part in international trade fairs will receive an 80% refund from the Government.
- For businesses at risk of not receiving payment on goods they already exported, there is a substantial Government grant.
Businesses and trade organisations all over Malta welcome these initiatives. We can see that there is real potential to turn this crisis into an opportunity for the country, and to help businesses grow through a re-engineered economy.