Issue link: https://maltatoday.uberflip.com/i/1529157
maltatoday | SUNDAY • 10 NOVEMBER 2024 4 INTERVIEW JP Fabri: 'Malta faces a productivity crisis' The headline figures are great – Malta is experiencing high rates of econom- ic growth and employment. But when you take a deeper look at the numbers, they point to a productivity crisis. In an interview with MaltaToday, economist JP Fabri warns that Malta does indeed face a productivity crisis, and the budget offers little to address this. He says the budget is heavy on short- term, socially-focused measures such as tax cuts and pension boosts, aimed at increasing disposable income rather than long-term investments to improve Malta's productive capacity. While Malta's economy has grown, Fabri warns it relies heavily on con- sumer demand and low-skilled tour- ism rather than high-value exports or advanced industries. All this limits sus- tainable and quality growth. In this regard, he insists that Malta needs policies that increase produc- tivity through upskilling and industry support. On Vision 2050, the government's initiative to establish a long-term eco- nomic and social direction, Fabri says this strategy must go beyond economic indicators and should integrate aspi- rations for education, health, and in- frastructure, to improve quality of life holistically. Malta has plenty of challenges, but Fabri says these can be overcome by changing the status quo – encourag- ing high-skill jobs, promoting creative education, and rethinking areas like health and environmental policy. A few examples he mentions include focusing on preventative healthcare, digitalising public services fully, and implementing targeted incentives to promote positive economic behaviour, such as green en- ergy investments and digital transfor- mation. Here, Fabri suggests looking at tax as a tool to shape positive social and eco- nomic behaviours. Such an example would be to tax behaviours that con- tribute to environmental issues, like car use, to tackle traffic congestion. Fabri also calls for more responsible and transparent governance through evidence-based policymaking and re- sults-oriented budgeting, especially to better connect government spending with tangible societal benefits. He says this would be particularly effective in areas like education and health, where high spending does not always lead to tangible outcomes. Fabri also speaks about pensions sus- tainability. He says the current system's reliance on a growing workforce is not sustainable, and instead suggests a multi-tiered approach involving gov- ernment contributions, private pen- sions and improved incentives for per- sonal savings. Above all, Fabri says Malta needs to focus on "quality of life" in its broad- er sense, which would include cultural heritage, environmental health, and a strong social fabric, to remain an at- tractive place for both residents and foreign investors. In this regard, he tells me the budget does not address Malta's productivity crisis adequately, and stresses that sustainable prosperity depends on higher wages, strong social and environmental systems, and a unit- ed national vision. JP Fabri sits down with Nicole Meilak to give an economist's perspective of the budget and tells her he would have liked to have seen more investment to improve the country's productivity.