Malta’s Pre-Budget 2026 highlights tax stability, energy price protection and investment in key sectors

The Ministry of Finance today published the Pre-Budget 2026 Consultation Document, which outlines Malta’s economic outlook, fiscal priorities, and policy measures ahead of the upcoming Budget. The document covers public finances, social policy, infrastructure, and long-term sustainability, while opening the door to consultation with businesses, unions, and civil society.

Economic outlook: Growth moderating, but resilience remains

Malta’s economy continues to expand, although at a slower pace than in recent years. Nominal GDP is projected to grow by 6.7 per cent in 2025, with real GDP moderating from six per cent in 2024 to around four per cent. The slowdown reflects heightened global uncertainty, including geopolitical risks, though domestic demand remains strong.

Inflation has eased to 2.4 per cent in 2024 and is expected to continue declining. Employment growth is robust, with Malta recording the lowest unemployment rate in the EU at 2.6 per cent in April 2025, providing stability for both households and businesses.

Fiscal discipline and the path to deficit reduction

The Government reiterated its medium-term objective of bringing the fiscal deficit below the EU’s three per cent threshold by 2026. In 2024, the deficit stood at 3.7 per cent of GDP, narrowing to 3.3 per cent in 2025.

Public debt is sustainable at 47.4 per cent of GDP, expected to rise modestly to 48.4 per cent in 2025 –⁠ comfortably below the EU’s 60 per cent benchmark. The Ministry stressed that spending plans are aligned with EU economic governance rules and that Malta is on track to exit the Excessive Deficit Procedure earlier than required.

Business competitiveness: taxation, sectoral growth and investment

The consultation document emphasises the importance of supporting Malta’s business sector in the face of global economic challenges.

On taxation, the Government confirmed that Malta’s top personal income tax rate remains at 35 per cent, positioning it competitively compared to other Southern European countries. Corporate taxation is being closely aligned with international frameworks, with Malta opting for a six-year derogation before implementing the OECD’s 15 per cent global minimum corporate tax. In the meantime, discussions are underway on alternative systems that simplify compliance while maintaining competitiveness.

Efforts are also being made to strengthen the Malta Tax and Customs Administration, including a €50 million investment in digital transformation. Enhanced use of artificial intelligence and data analytics is expected to streamline compliance, reduce administrative burdens, and improve efficiency for businesses.

Sector-specific developments were also highlighted:

• Tourism remains a key driver of growth, with inbound visitors surpassing 3.5 million in 2024 and per capita spending increasing. Workforce upskilling programmes such as Tourism Excellence Malta aim to raise service quality.
• Gaming and financial services are projected to maintain stable contributions to gross value added, even amid slowing growth. In 2024, financial and insurance activities generated 8.6 per cent of Malta’s GVA, though productivity pressures persist.
• Manufacturing saw a contraction in early 2025, but optimism remains for recovery in the second half of the year, with new opportunities linked to AI-powered automation and the green transition.

The Government also underscored its commitment to keeping energy prices stable for businesses. By maintaining a zero-energy inflation rate, Malta shielded firms from the steep costs experienced elsewhere in Europe during the energy crisis.

Social measures with indirect business impact

Beyond direct business measures, the Pre-Budget document places considerable emphasis on social investment, which indirectly supports economic stability and consumer demand. Pensions, child allowances, and housing initiatives all saw increased funding in 2024, while reforms in income tax and COLA adjustments aim to sustain disposable incomes.

Healthcare investments at Mater Dei and Gozo General Hospital, as well as continued emphasis on ageing demographics, reflect long-term pressures that could influence labour supply and social spending.

Infrastructure, energy and climate

Infrastructure and green investment are presented as essential to competitiveness. Initiatives include a second electricity interconnector, investment in large-scale battery storage, and preparations for offshore renewable energy projects.

Waste management is another priority, with the €500 million ECOHIVE complex and the forthcoming Waste-to-Energy Plant expected to supply around 4.5 per cent of national electricity demand. These projects are positioned as both environmental and economic, reducing costs over the long term while contributing to EU climate commitments.

Education and workforce development

The National Education Strategy 2024–2030 continues to invest in skills and training, with a sharp decline in early school leaving to 9.6 per cent in 2024, down from 33 per cent in 2005. More emphasis is being placed on STEM, vocational training, and digital skills to ensure the workforce remains adaptable to new industries.

Balancing fiscal prudence with competitiveness

The Pre-Budget 2026 Consultation Document paints a picture of resilience and cautious optimism. While external challenges are expected to weigh on growth, Malta’s fiscal position remains sustainable, and policies continue to emphasise both social support and business competitiveness.

For businesses, the Government’s priorities of tax stability, energy price protection, digitalisation of compliance, and targeted sectoral investment stand out as central themes.

Stakeholders are now invited to provide feedback before the full Budget is presented later this year.