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2 maltatoday | SUNDAY • 28 SEPTEMBER 2025 NEWS JP Fabri Economist Malta, where are the babies? BEHIND the reassuring statistics of growth and low unemployment lies a challenge that will define Malta's long- term future far more profoundly than any fiscal deficit or quarterly GDP release. The country's fertility rate has fallen to one of the lowest in Europe, well below replacement levels. Population growth has continued in recent years, but only because of in- ward migration. Fewer children are being born, and the economic, social, and cultural consequences of this trend are difficult to overstate. This was also highlighted by Finance Minister Clyde Caruana as Malta's biggest challenge. Low fertility is a structural issue, not a passing phase. It reflects a collision between the realities of modern life and the decision to start a family. In Mal- ta, as elsewhere, the cost of housing has escalated, leaving many young couples struggling to secure a home. The de- mands of work and commuting leave little space for balance, while the cost and logistics of childcare weigh heavily on household budgets. Traditional net- works of extended family support, once so central to Maltese life, have weak- ened, leaving parents more isolated. In this environment, the decision to have children becomes not just an emotional one but a daunting economic calcula- tion. Fewer workers to sustain pensions The arithmetic is stark. With fertility rates this low, the ratio of working-age people to retirees will worsen sharply. Fewer workers will have to sustain the pensions and healthcare of a growing elderly population. That will place in- creasing strain on public finances. The short-term solution has been migra- tion, which has filled labour gaps and sustained growth. But migration alone cannot carry the system indefinitely. It raises important questions about inte- gration, cohesion, and the capacity of infrastructure to keep up with rising de- mand. A population policy focused only on numbers misses the deeper point. The real issue is why Maltese families are hesitant to have children in the first place. Other countries offer lessons. France has long recognised the importance of family policy, offering generous paren- tal leave, heavily subsidised childcare, and tax benefits that ease the cost of raising children. The Nordic countries pioneered systems of paternal leave that shifted culture as much as policy, creating a model where raising chil- dren is seen as a shared responsibility. Estonia invested in digital government services that streamline access to fam- ily benefits, removing the friction that can deter parents from seeking support. Even Singapore, facing chronically low fertility, has experimented with housing grants, cash incentives, and tax breaks to tilt the economic equation in favour of families. Results have been mixed, but the recognition that demographics shape destiny has been clear. Piecemeal interventions not enough For Malta, piecemeal interventions will not be enough. What is needed is a systemic approach that reduces the barriers to parenthood across sever- al fronts. Housing policy must create accessible and affordable pathways for young families. Childcare services need to be not only available but also flexible and of high quality. Workplaces must evolve towards genuine family-friendli- ness, recognising that flexible arrange- ments are not a perk but a necessity in sustaining a modern workforce. Cultur- al reinforcement is just as important. Parenthood should not be seen as a sac- rifice that undermines career prospects but as a valued choice supported by so- ciety. Tax reform is a central part of this equation. Families need to feel a tangi- ble financial benefit from their decision to raise children. One option is to grant tax-free income for the first five years after the birth of a first child, easing the affordability crunch at the stage when expenses are most pressing. For second children, direct cash incentives could provide additional support, recognis- ing the broader social value of larger families. These measures would not solve the demographic challenge alone, but they would send a clear signal that the state recognises and shares the fi- nancial burden of child-rearing. Over time, such reforms can tilt household decision-making and make parenthood more economically viable. Policy innovation could also play a role. Malta could pilot savings accounts for children where the state matches contributions, building long-term se- curity while easing parental concerns. Housing schemes could be linked to family formation, with targeted grants for young couples purchasing their first home after having children. Pen- sion reforms could recognise periods of child-raising as contributory, protect- ing parents, especially mothers, from gaps in retirement security. Together, these measures would create an envi- ronment where having children is not an economic penalty but a supported life choice. Turning a timebomb into opportunity The pre-budget document acknowl- edges Malta's demographic reality, but acknowledgment is not enough. This is the most profound structural issue the country faces. An economy can- not thrive indefinitely without renewal through new generations. Migration can buy time, but it is no substitute for a sustainable demographic base. As an economist, my view is clear. Malta must place fertility and fami- ly policy at the centre of its long-term economic strategy. This means con- fronting the affordability barriers that make parenthood prohibitive, reshap- ing tax and benefit systems to ease the burden, and reinforcing cultural norms that value family life as a cornerstone of national resilience. The tools exist, the examples are plentiful, and the need is urgent. What is required now is the courage to weave them into a coherent national agenda. Because no matter how disciplined our budgets or how strong our short- term growth, an economy without chil- dren is ultimately an economy without a future. The real test of statesmanship is whether Malta can turn its demo- graphic timebomb into an opportunity to design a society where family life is viable, dignified, and aspirational once again. That would be the most pro- found investment Malta could make in its own resilience. An economy without children is ultimately an economy without a future File photo