Employers call for ‘decisive’ shift in public spending ahead of Budget 2027

Current expenditure that sustains short-term consumption without raising productivity should be redirected towards long-term investment, the Malta Employers Association has said.

Providing examples of such long-term investment, it mentioned technology, skills, digital infrastructure, energy security, industrial capacity, regulatory efficiency and export capability.

The association presented its pre-budget document to Prime Minister Robert Abela at Castille, calling on Government to deliver a “transformational Budget” that moves the country away from population-led, consumption-driven expansion and towards smart growth based on productivity, higher value added, innovation and export competitiveness.

Themed Ensuring Smart Growth for Balanced Prosperity and a Stronger Society, the association’s submission argues as the first Budget of a new legislature, it should translate Malta Vision 2050 into clear priorities, measurable outcomes and disciplined investment decisions.

The association acknowledged the country’s strong headline performance, including sustained growth and low unemployment. However, it said that these figures conceal a growing structural weakness, whereby the economy is still expanding mainly by adding people rather than significantly increasing the value generated by each worker.

“This model is intensifying pressure on housing, transport, energy, drainage, healthcare, public services and the environment,” it said. The association maintains that the country’s limited land, labour and infrastructure can no longer sustain growth at any cost, and that public expenditure should increasingly be assessed by the value it creates rather than by its political visibility.

The association is proposing a budgetary framework built around six priorities: economic transformation; a national productivity agenda supported by technology and artificial intelligence; education and skills; infrastructure and investment; good governance; and quality of life and social wellbeing.

“In this context, Budget 2027 must set that process firmly in motion. While Malta Employers recognises the fact that in recent years Government has introduced some incentives to promote investment in technology, it now calls for a more decisive shift in emphasis towards sustained investment that re-engineers the economy through capital investment, new technology, artificial intelligence, and the retraining and reskilling of the workforce.”

The Association acknowledged that a significant economic transformation cannot happen at the flick of a switch. “Malta’s economy is predominantly service-based and many business operators serve strategically important sectors like transport, elderly care and waste management depend fundamentally on people physically present at the workplace.”

Technology and AI must be deployed to raise the value of what each worker produces, to free capacity and to create higher-quality role where and when technology renders this possible, it said. “Such transformation must be a gradual, carefully-managed process, sector by sector, and in close dialogue with social partners in order ensure the least possible socio-economic pain on the country.”

Budget 2027 should incentivise investment in automation, digitalisation, AI, green technology and advanced manufacturing, particularly among smaller enterprises facing high upfront costs, it adds. “The pre-budget document puts forward a proposal for a National AI Upskilling and Reskilling Fund for the existing workforce, alongside an AI Literacy Programme across the education system. It calls for stronger career guidance, wider work-based learning and a renewed focus for MCAST on the vocational and technical skills urgently required by industry.

The submission calls for coordinated, long-term infrastructure planning covering electricity, roads, public transport, drainage, healthcare and maritime cargo facilities, presented not as a sectoral wishlist but as a strategic national requirement.  The association is proposing that an inter-ministerial body be set up to align infrastructure investment with economic development and Malta Vision 2050. “Environmental and development enforcement, planning decisions, urban regeneration and sustainable transport are treated in the document as primary economic necessities rather than secondary concerns,” it said.

Malta Employers President Ivan Refalo said: “Budget 2027 must be judged on whether it moves Malta decisively towards higher-quality growth or postpones that choice for short-term consumption. Malta cannot continue to measure success merely by aggregate GDP growth whilst overlooking pressures on infrastructure, communities and quality of life. We need balanced prosperity that raises incomes, strengthens competitiveness and uses our limited resources responsibly.”

Director-General Kevin J Borg said: “Our central proposition is that Malta needs smart, balanced growth for a stronger society. Budget 2027 should therefore align fiscal policy with Malta Vision 2050 and prioritise measures that raise output per worker, strengthen productive investment and reduce reliance on labour-intensive expansion. Public expenditure should be assessed by outcomes and opportunity cost. Our submissions are not promoting austerity; they call for better allocation of resources towards technology adoption, skills development, industrial and digital capacity, energy resilience, infrastructure, regulatory efficiency and export capability”.