Many articles have been published about what to expect this year. There are many predictions but what eventually happens is beyond any powerful crystal ball.

However, it is reasonable to predict that events and trends which made the headlines last year can help us foretell the events - on the notion that some continuation occurs. This year, the EU will have a new Commission with an onerous economic and governance reform agenda and we shall elect a cohort of six MEPs to represent us commensurate to our area - an island of 316 km², yet so far this geographical limitation has never been a limit to the size of our ideas.

As always, hard work matters.  Integrity also matters, so we need to recommit ourselves to the fact that our reputation is paramount.  Mediocrity has no place in Malta’s strategy for the future. Credibility is the cornerstone for a strong economy and a reliable country.

To us islanders – there is nothing we could not do. It was that dream that drove us to join the European Union, it led to transform our economy, with generous funds since 2004 that helped transform us to enjoy a higher standard of living. The impact of generous subsidies on energy and food prices has been beneficial resulting as the main reason why Malta’s core rate of inflation is moderate.

Castille reminds us that Malta’s economy remains resilient together with a vibrant labour market. Unemployment remains at record lows and well below European averages, regardless we cannot tone down the key risks for 2024, particularly those arising from supply disruptions of commodity flows.

These result from potential blockades of key shipping routes in the Red Sea and the Suez Canal and any intensification of Middle East hostilities could even tempt Lebanon to join the fray. Apart from wars and human atrocities associated with such troubles, one may rejoice that the advent of A.I and generative powers will give a faster transformation to the industrial and professional sectors.

On the upside, AI has the potential to significantly enhance productivity in an economy.

This will increase national income yet, on the other hand, the question that keeps coming up is whether it will disrupt the labour market to such an extent that jobs will be lost and they will not be readily replaced, thereby causing poverty, unless workforces are urgently re-skilled.

This concerns Labour redeployment on a scale that does not even account for the changes AI will bring in desk bound jobs, like working on Excel spreadsheets, accounting, the drafting of letters and reports, regular legal advice and standard correspondence. applications.

Many ask how secure is ChatBT?  The answer is that it is highly secure, using encryption and authentication methods to ensure that conversations are kept private.

This makes it ideal for business applications, such as customer service, where sensitive information may be discussed. Additionally, ChatBT is designed to be compliant with regulations such as GDPR and HIPAA, ensuring that any data shared is kept secure and private.  Most office tasks will be soon replaced by the likes of ChatGPT.

This will reduce the required staff size and hence the need to put up tables in back offices and headquarters.

Another whiz kid is “Machine learning”. This is a type of AI, that can automatically adapt with minimal human interference, whilst ‘Deep learning’ is a subset of machine learning which is based on artificial neural networks that mimic the learning process of the human brain. In professional offices, let us now get an insight into how AI can transform the tax function for stakeholders in general.

Whilst it may be true that some jobs or functions, such as bookkeeping and accounting, will be taken over by AI, other openings will emerge and fill the gap.  Naturally for Malta, there is a Red sign on the horizon that our education system needs priming up.

Logically, any redundant staff, need to be retrained and expeditiously developed to fulfill other tasks.  The past economic model of recruiting low-skilled TCN’s in their thousands need to be complemented by attracting more talent of a higher calibre.

Again, for higher-level tasks, such as advisory, AI would require machine learning involving an expert (or a panel of experts) who would, gradually and over time, train the machine to output the correct conclusions following an analysis of the information related to the case at issue.

Guess what can change in the next five years?  Surplus blue-collar workers may be persuaded to work in offices, yet to be realistic there will be few of them. Another positive development according to the finance minister is the upgrading of the Real Estate Investment Trusts (REITs) legislation.  This is well established in Europe but with an enhanced incentive tax legislation, it will soon be launched on the Malta Stock Exchange.  Having so many high rental offices and quality residential assets, these can be securitized and enable retail investors to put savings in the development and management of buildings.

Many banks have loaned to developers on the basis of expected sales prices and upmarket rental income which now looks as a building block for retail investors buying REIT’s. Another party stopper this year is the calming of interest rates.  European Central Bank raised interest rates six times during 2023, with the deposit facility increasing from 2% at the start of the year to a record of 4% towards the end of September 2023.

Interest rates were kept unchanged during the final two meetings of the year held in October and December.

On the other side of the pond, the Federal Reserve raised the target federal funds rate on four occasions during the year, with the target range rising to between 5.25% and 5.50% by the end of July 2023 from 4.25% to 4.50% at the start of the year. Interest rates in the US were kept unchanged since July 2023.

In summary, focusing on the recent inflation readings across the world these led to a slowdown and everyone hopes major central banks will cut interest rates multiple times during the course of 2024.