Malta must change its economic model to deprioritise construction and find new ways of generating growth that do not damage the environment, Finance Minister Clyde Caruana has said.
“We need to change the way we think, we need to change the way our economy works. If we repeat the same things, we will get the same results,” Caruana told a gathering at a pre-budget consultation meeting held in Gozo late on Friday.
The finance minister acknowledged that politicians “from both sides” had for several decades relied on the construction sector to boost GDP growth and admitted that this was an “easy way out”.
“I’m not saying construction will stop. But that does not mean we should not look at other opportunities.
But with Malta and Gozo fast running out of land and people’s standard of living having increased, the country was now reaching its limit.
“People are getting tired of cranes and concrete,” the minister said, in one of the most candid admissions to date that the economic model underpinning Malta’s growth was flawed.
What people now wanted, he said, was open spaces and quiet environments.
“I’m not saying construction will stop. Nobody wants it to stop. But that does not mean we should not look at other opportunities that allow us to grow without polluting, just like other countries do,” he said.
He said that just as the Labour government had proven its credibility in generating employment, it would now have to “become credible” when it came to the environment.
Caruana, an economist by training, is widely acknowledged as the brains behind the economic model that saw Malta attract tens of thousands of workers, boosting its population and with it the demand for housing and construction projects.
He had told Times of Malta in December 2020, shortly after being appointed Finance Minister, that the government wanted to change that employment plan.
Shift to begin with Budget 2022
Caruana said the upcoming budget for 2022 would serve as the first step towards transitioning away from its construction-centric economic model, though he stopped short of providing details of how that would take place.
Instead, the finance minister hinted that the government would be placing greater emphasis on education.
People with higher levels of education had access to more economic opportunities, he said, and greater opportunities led to higher income.
“If we improve our education, our economic activities will change. This budget will start doing that,” Caruana said.
Finance Minister Clyde Caruana said the country’s economic model had to change.
The finance minister reassured his audience that the country’s public finances remained in good shape, despite significant increases in the public deficit and debt caused by the COVID-19 pandemic, and reiterated his pledge that this year’s budget as well as subsequent ones would not introduce any new taxes.