Malta has a small domestic market, produces only about 20 per cent of the food it needs, and has no raw materials, a limited supply of fresh water and no energy resources other than solar energy. Its only resources are its ports and its educated and skilled people. Development has been based on shipbuilding and repairing, manufacturing for export, tourism, and, more recently, free port activities and financial and business services.
In 1979 the UK military base (a major employer and generator of government revenue) closed; consequently the 1980s global recession leading to a worldwide collapse of shipbuilding hit Malta particularly hard, and there were numerous factory closures.
During the 1990s, the public sector was reduced and state enterprises privatised. Expansion of tourism and liberalisation of investment, international trade, fiscal policy and the financial services sector led to steady growth, averaging nearly five per cent p.a. over the decade.
The long period of good, steady growth came to an end in 2001, as export demand fell and the economy stalled during 2001–04. After four years of stagnation, growth resumed, rising to 4.3 per cent in 2007 and 4.4 per cent in 2008. But the rapidly worsening international economic conditions and global fall in demand caused growth to collapse in 2009 (–2.8 per cent), recovering in 2010 (4.3 per cent), and remaining steady at one to three per cent p.a. 2011–15.
Malta joined the European Union in May 2004 and adopted the euro currency in January 2008, replacing the Maltese lira.