IMF lauds Malta’s bold response to Covid, calls for urgent action towards exit from grey-list

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The International Monetary Fund expressed positive feedback on what it describes as Malta’s “swift and bold response” to the COVID-19 pandemic. In a statement, the Fund said that economic growth is expected to gain momentum in the coming months, although uncertainty remains high and downside risks cloud the outlook. It insisted that coordinated policy support should continue until the recovery firmly takes hold, balancing near-term growth with long-term stability while pursuing structural reforms to strengthen the economy’s resilience.

While noting recent progress in strengthening the AML/CFT framework, the IMF called for urgent action to address the remaining deficiencies in the AML/CFT framework and exit the FATF’s grey list. They recommended prioritizing the areas of transparency on beneficial ownership information and financial intelligence related to money laundering and tax evasion. It also advised the authorities to continuously assess high-risk activities and their impact on correspondent banking relationships.

The Fund recommended that the pace of unwinding fiscal support should be managed carefully and flexibly. Once the recovery is fully entrenched, efforts should focus on rebuilding buffers gradually and fostering infrastructure investment and economic transformation. Directors encouraged strengthening tax administration, managing contingent liabilities, and ensuring pension system sustainability. They recommended a holistic review of the overall tax system, taking into consideration the global minimum corporate tax proposal. They noted that the planned review of the infrastructure investment and management framework is critical to boosting Malta’s capacity to absorb EU funds.

Th IMF calld on authorities to implement structural reforms to foster higher and sustainable growth, particulaly labour market reform. Completing the corporate insolvency framework reform remains an important priority. Further efforts are also needed to promote stronger and more sustainable tourism, and support digital transformation and decarbonization. Directors welcomed the authorities’ commitment to reducing greenhouse gas emissions in line with EU targets.

Finally, the Fund said that it was projecting a 5.7% growth in 2021 and 6.0% for next year. Unemployment is expected to go back to 2019 levels to 3.6% (it had reached 4.3% last year) and to drop slightly next year.

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