Bank of Valletta Chairman Gordon Cordina has struck a cautiously optimistic tone on the potential impact of the Iran war on Malta’s economy, emphasising both the country’s resilience and the need for continued vigilance.

Speaking about how external shocks typically filter into the economy, Dr Cordina explained that early warning signs often emerge through reduced business activity, particularly declining order books. This, he noted, provides businesses with a critical window to adjust operations and engage with authorities and stakeholders before challenges escalate.

Malta’s small size works to its advantage in such scenarios. The close proximity between businesses, Government, and financial institutions enables swift coordination and policy responses. This dynamic, he said, effectively functions as a form of social dialogue, allowing preventive measures to be designed and implemented efficiently.

Dr Cordina also pointed to Malta’s underlying economic buffers as key stabilisers. These include relatively strong public finances, with a manageable debt-to-GDP ratio, and a well-capitalised banking system with robust liquidity. Together, these factors help sustain stability, including in interest rates, even in the face of external shocks.

However, he warned that if early warning mechanisms fail to operate effectively, the consequences could become more tangible. Potential risks include a decline in exports and tourism activity, which could in turn affect employment levels. On the cost side, disruptions such as logistical challenges or rising commodity prices could exert upward pressure, potentially feeding into higher interest rates driven by the European Central Bank.

Dr Cordina stressed that such risks remain largely theoretical at this stage, noting that Malta has weathered similar global disruptions in recent years, including the Russian invasion of Ukraine and maritime security threats in Eastern Africa, with limited fallout.

“From where we stand, those buffers, those defences, for the Maltese economy are still present,” he said.

While stopping short of outright optimism, he underscored the importance of preparedness. “We remain cautious,” Dr Cordina concluded, “but we should also remain prepared and ready to deploy our toolkit as the needs will dictate, depending on the duration of the ongoing crisis and any potential escalation.”