s governance. there is no other path if the fund wishes to safeguard its reputation as a credible, even - handed and trusted global economic policy advisor to its members. madame lagarde, i understand that you are yet to visit the caribbean in your official capacity as managing director. given the fund ’ s heightened engagement with the region, we think it is an opportune time for you to visit and obtain a first - hand perspective of our strides towards economic development and to experience the warmth and hospitality of the caribbean islands. bis central bankers ’ speeches

nevertheless, still faces a number of challenges. one area of relevance is the inflation rate, which at an average rate of 2. 5 % since 2004, has tended to stay slightly above the 2. 1 % average rate in the euro area as a whole, although the latest data show an annual inflation rate below that for the euro area. in this context, greater attention should be given to the identification of any structural shortcomings that may be contributing to the slightly higher inflation, and the excessive volatility apparent in malta ’ s inflation rate as compared to the euro zone. although imported inflation is inevitable, we have to be particularly mindful of locally generated price pressures or inflexibilities in structures which may not be responding sufficiently to competitive pressures. productivity growth is essential not only for enhanced competitiveness but also to justify wages that permit a sustainable increase in living standards. productivity growth in malta since eu accession was broadly in line with that experienced by the euro area as a whole. still, catching up with the rising living standards of the more affluent eu countries requires even faster growth in productivity. to overcome this challenge, policy makers need to continue in their efforts to provide the necessary incentives for investment and to remove the impediments, such as needless bureaucracy, that may hinder its implementation. bis central bankers ’ speeches on a positive note, however, malta ’ s efforts to diversify its economy into new sectors, especially in business services and more capital intensive manufacturing industry have helped to prevent the boom - bust cycles that were being experienced in other economies. productivity is also influenced by growth in human capital. in this regard, substantial public funding has been allocated to investment in education, training and retraining programmes which enable workers, to acquire new skills required by newly set up industries in malta. labour market flexibility also contributes to productivity growth by enabling a smoother transition from old to new sectors. over the past decade the proportion of the working - age population with a tertiary education level grew by two - and - a - half times to 12. 4 % of the labour force. nevertheless, there is still further catching - up to be made as the euro area average is almost double that of malta. furthermore, not only must the number of graduates be increased, but the quality aspect is also of crucial importance for productivity improvements. apart from productivity aspects, competitiveness is also affected by cost developments. labour costs are a crucial element particularly in open economies, where a significant share of output is exported