Economy and trade
Gibraltar’s economy is well diversified, with tourism and financial services accounting for approximately 30% of the economy each, the port and shipping 25%, and service-related activities such as telecommunications, ecommerce and e-gaming accounting for the remaining 15%. In the past, Gibraltar's economy was dominated by the British naval dockyard and military presence,. However, with the major reductions over the last few decades, the military presence only contributes to about 7% to the local economy compared to 60% in 1984.
Economic growth in the coming years is likely to be driven by the buoyant financial services sector, which has been growing rapidly. Growth in the technology sector is also promising, with a number of large betting and gaming companies benefiting from the favourable tax regime, developed telecommunications infrastructure and proximity to the prime European market.
Gibraltar’s economy reversed global trends and recorded economic growth of an estimated 6% 2008-2009, continuing the strong growth trend of 8.8% in 2007-2008 and 12.7% in 2006–2007 (source: Gibraltar Budget). Gibraltar has received considerable assistance from the EU Secretariat with some 191 separate projects co-funded by the European Union in the period 2000–2006 and a new round of EU funding for the period 2007–2013 which began on July 1, 2008. The greatest number of these projects involved assisting small-to-medium-size enterprises in Gibraltar to start up or expand. One of the flagship projects for the government is the new air terminal building, expected to be functioning in 2010. Gibraltar is also upgrading the frontier by improving road access and installing a new tunnel. This should have a great effect on tourism.
Low levels of public debt
According to Gibraltar’s 2009 Budget, public debt has remained at £93 million, totalling to less than 12% of GDP. This compares extremely well to the United Kingdom’s debt of 40% of GDP in 2008, and the EU’s convergence maximum of 60%. The government has stated that it plans to take advantage of this low debt level to part-finance its extensive capital investment program for the next few years, although total debt raised will still be within sensible levels.
A healthy budget surplus
The government of Gibraltar recorded a budget surplus of £17 million for the year ending March 2009, which was broadly in line with the surplus it had predicted in last year’s budget, although both spending and income levels were above those predicted. It also intends to use part of the surplus created from the strong economic showing since 2006 to develop public services, especially healthcare and care for the elderly. Consequently, it increased the health budget by 8% for 2008–2009, and elderly care spending by the same amount.
The Gibraltar government started the 2008 fiscal year, which ended on 31 March 2009, with a good position carried forward from the previous year. Overall revenue grew by £19.5 million, from £261.2 million in 2006–2007 to 280.7 million in 2007–2008. This demonstrates a rise of 7.5%, taken mainly from higher income-tax receipts created from higher employment levels (despite last year’s budget tax cuts), and also from higher import-duty receipts.
Increased numbers of tourists
2008 was another good year for tourism in Gibraltar, with an increase of 7% in visitor numbers over the previous year. The figure slightly exaggerates the tourist element,because it includes what Gibraltar calls “frontier workers” who reside in Spain and cross the border to Gibraltar to work. Excluding these workers, some 8 million visitors travelled to Gibraltar in 2008 via the land frontier with Spain, which equates to around 22,000 visitors per day. Tourist arrivals by air, sea and land have all risen to record levels.
Bucking the trend
Financial services, business and real estate, and government and other services are the largest contributors to the economy of Gibraltar, creating more jobs and return than any other areas. The economy of Gibraltar has been continuing to grow despite of the economic challenge faced around the globe. In the year to 31st March 2008 the economy of Gibraltar grew by 8.8% to £804 million pounds of GDP. In the financial year ending 31 March 2009 economic growth continued at an estimated 6% to £850 million pounds of GDP.
The official inflation rate in Gibraltar during 2008 was 2.8%, driven largely by global increases in oil and food price inflation which is imported from Gibraltar’s close ties with the United Kingdom and Spanish economies, which together account for around 80% of Gibraltar’s non-petroleum products.
Funding of new projects
Gibraltar runs an Improvement and Development Fund, which it draws on to support a number of projects created to help or beautify the country, or provide amenities. It predicted expenditure of £25 million through the I&DF fund in 2008–2009, the majority will make Gibraltar an even more attractive and interesting place for tourists to visit, and will help Gibraltar’s citizens. Further roads, additional affordable housing schemes, a new prison, and the new air terminal are all projects in progress.
Foreign investment in Gibraltar is encouraged by the government mainly to create job opportunities. Tax concessions are obtainable to light manufacturers who intend to export from Gibraltar. Any corporation with a development aid license is excused from paying income tax on profit earned from the development until the total gains from the development surpass the percentage of agreed capital expenditure.
To be eligible for a license, projects usually need to:
o provide at least two housing units in Gibraltar;
o create new industry;
o offer a material and immovable asset in Gibraltar;
o expand the tourist industry;
o supply new employment opportunities; and
o improve the economic or financial infrastructure of Gibraltar.