On the the 12th May, 2025, the Central Bank published a policy note that examines the demographic trends in Malta, specifically the native Maltese population, and projects its future evolution and implications for the labour supply.

The Policy Note concludes that foreign migration has been the primary driver of Malta’s recent rapid population growth, particularly involving people of working age. In contrast, the native Maltese population has been declining and ageing. This decline is attributed to a low fertility rate among native Maltese women (1.16 in 2023, well below the replacement rate of 2.1), coupled with declining mortality rates which contribute to an older population.

The study projects that the native Maltese population is set to decline in all considered scenarios, falling by around 14.0% from 2023 levels (402,000) to about 350,000 by 2050 under the baseline scenario, and even more steeply if fertility rates do not increase. This decline in the total native population has direct implications for the native working age population, which is also projected to contract over time.

A key conclusion for the labour market is that growth in Malta’s working age population and the labour supply is expected to be fully driven by foreign nationals and their high participation rate. Foreigners typically have significantly higher participation rates (87.0% in 2024) compared to Maltese natives (66.5% in 2024), and this high level of participation is expected to be sustained. By 2035, foreigners are projected to make up 45.9% of the working age population, up from 30.4% in 2023. Consequently, medium-term labour supply growth is expected to remain heavily dependent on foreign workers.

With regards the future labour supply in Malta, the analysis focuses on projections up to 2035. Based on anticipated developments in the working age population and participation rates, the labour supply is expected to continue expanding, driven by an increase in foreigners. By 2035, the labour supply is projected to reach approximately 406,000 people – labour supply today stands at around 291,000 by end 2024 – meaning an average increase of around 11.5K migrant workers annually for the next 10 years. At this point, around half of the labour supply is projected to be of foreign nationality, with the projected decline in the Maltese working age population being partly offset by an increase in native activity rates, which is expected to broadly stabilise the level of Maltese workers in the total labour supply at around 200,000 persons.

The Policy Note highlights that the low fertility rate among native Maltese women needs to be addressed. It suggests efforts to balance family and career choices for both men and women, potentially through family-friendly policies, increased involvement of fathers, and adapting social norms and labour markets.

Furthermore, the report suggests ways to moderate the demand for foreign workers and increase labour supply, such as enhancing the productivity of the workforce, shifting towards a more capital-intensive economy, equipping Maltese natives with skills for higher value-added sectors, and potentially encouraging older persons to stay in employment longer.

I believe such the Policy Note delivers a wealth of information and possible implications for businesses, especially with regards the future labour market, that will have clear consequences on businesses operating in Malta. Such implications include:-

• Workforce Availability: The projected decline in the native Maltese working age population means that businesses will increasingly face challenges in finding and recruiting native staff.
• Reliance on Foreign Workers: Businesses are already reliant on foreign workers and this reliance is projected to deepen. This may require businesses to adapt recruitment, training, and integration strategies for a more diverse workforce with potentially shorter lengths of stay.
• Skills Gap: The report suggests equipping Maltese natives with skills for higher value-added sectors. This implies potential skills mismatches in certain industries, requiring businesses to invest in training or seek highly skilled foreign labour.
• Adapting Business Models: To counteract labour supply challenges, the report suggests shifting towards a more capital-intensive economy and enhancing productivity through technology. Thus business that are are slower to adopt to new technologies or do capital digital investments, need to strategically plan for these transitions to remain competitive, as they will find it increasing hard to survive.
• Ageing Workforce: The ageing of the native Maltese population means businesses may have an older native workforce. This can impact productivity, require workplace adaptations, and necessitates robust knowledge transfer and succession planning.
• Implications for Family Businesses: These demographic shifts are particularly pertinent for family businesses, with regards succession Planning. With am ageing native population, this means that the pool of potential successors within the family or experienced native managers available for leadership roles outside the family may be smaller. This could challenge traditional succession models based solely on family members or long-tenured native staff.

Given these significant and projected demographic shifts and their profound impact on the labour market, it is crucially important for businesses, including family businesses, to engage in strategic planning by taking such matters, like changing demographics, into account. Failing to plan for a smaller native workforce, increased reliance on foreign labour, an ageing population, and the potential need to adapt business models and invest heavily in technology, pose significant challenges to operational continuity, growth, and long-term sustainability. Strategic workforce planning, succession planning, investment in technology and training, and adapting workplace culture to a diverse workforce are essential steps businesses should consider based on the insights provided in this Policy Note.

Obviously those businesses engulfed by an Operations Mindset, who are finding it hard to adapt to today’s reality let alone plan for a future one, run a greater risk of not making it into the future.