Malta’s GDP per capita in PPS terms has been stuck at around 77% of the EU average since 2003. 2  1  IMF, World Economic Outlook, October 2010. 2  Source: Eurostat. BIS Review 156/2010  1  The focus must be on productivity and competitiveness Faster sustainable growth will not, however, be possible unless we produce goods and services that meet the test of increasingly competitive and discerning markets. This, as the recent Pre-Budget Document acknowledged, requires, among others, higher productivity levels, which would then raise the rate of growth of potential output. Productivity has been improving recently, but against the backdrop of a relatively poor longterm record, which leaves Malta well behind the best performers in the euro area. 3 Even more worrying, compensation levels have risen much faster than productivity. The explanation for this relatively poor outcome should be sought in the way we use productive resources, principally labour and capital. Malta’s labour resources are underused… To begin with, not enough people participate in the formal labour market. In 2009 the employment rate stood at 55%, compared with a euro area average of nearly 65%. 4 The activity rate among women and older workers in particular is especially low. Furthermore, long-term demographic projections suggest that, over time, the labour force will shrink. According to the European Commission, the working-age population in Malta will contract by more than 20% by 2060. 5 In the light of these trends, raising participation rates should be a priority.

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